Arizona Court of Appeals Division One Holds That Insurer is Not Required to Show that Insured Rejected in Writing Underinsured Motorist (UIM) Coverage to Deny UIM Benefits Under A.R.S. ¶ 20-259.01(B).

A GEICO customer was injured in an auto accident.  After settling with the other driver, he submitted a claim to GEICO because the other driver was underinsured.  GEICO denied the claim and the customer filed suit for declaratory judgment, breach of contract, and bad faith.  The parties filed cross-motions for partial summary judgment on the declaratory judgment issue.

The trial court granted summary judgment to the customer.  The parties then settled the remaining claims and GEICO appealed after final judgment was entered. 

The sole issue on appeal was whether the customer was entitled to underinsured motorist (“UIM”) coverage benefits.  The issue turned on whether A.R.S. ¶ 20.259.01(B) requires an insurer to obtain a written rejection of UIM coverage from an insured.  The statute provides that motor vehicle liability insurers shall:

make available to the named insured thereunder and shall by written notice offer the insured and at the request of the insured shall include within the policy underinsured motorist coverage which extends to and covers all persons insured under the policy, in limits not less than the liability limits for bodily injury or death contained within the policy.  The selection of limits or rejection of coverage by a named insured or applicant on a form approved by the director shall be valid for all insureds under the policy.  The completion of such a form is not required where the insured purchases such coverage in an amount equal to the limits for bodily injury or death contained in the policy.

If the insurer does not provide the statutorily mandated offer, the insured is entitled to receive UIM coverage as a matter of law.  Estate of Ball v. Am. Motorists Ins. Co., 181 Ariz. 124, 126-27, 888 P.2d 1311, 1313-14 (1995). 

Interpreting a previous version of the statute, the Court of Appeals had held in State Farm Mut. Auto. Ins. Co. v. Ash, 181 Ariz. 167, 173, 888 P.2d 1354, 1360 (App. 1994), that “[t]he insurer need only make the written offer.  The insured must then request that the offered coverage be included in his policy.  No express rejection is required.”  Since that decision, however, the statute was amended twice to add the above-quoted sentences referencing the “form approved by the director.”

The Court of Appeals concluded, however, that the plain language of the statutory additions “does not require a written rejection of UIM coverage nor does it require that an insured use a form approved by the Arizona Department of Insurance (“ADOI”) to select or reject coverage.”  If the legislature had so intended, “it could have done so explicitly.” 

The legislature later amended A.R.S. ¶ 20.259.01(B) to provide that “[t]he completion of such a form is not required where the insured purchases such coverage in an amount equal to the limits for bodily injury or death contained in the policy.”  But this sentence should not be read to describe the only circumstance in which an insured is not required to accept or reject coverage using an approved form.  Rather, under the “last antecedent rule,” the sentence merely modifies the preceding sentence and thus “provides that in cases where an insured purchases maximum UIM coverage, that selection is valid for all insureds under the policy, regardless of whether coverage was selected on a form approved by ADOI.”

The customer’s public policy arguments concerning potential abuses by insurance companies “are matters more properly addressed by the legislature.”

The Court denied as a matter of discretion GEICO’s request for an award of attorneys’ fees on appeal, reversed the trial court’s grant of summary judgment for the customer, and remanded with instructions to enter summary judgment for GEICO.

Presiding Judge Portley authored the opinion; Judges Downie and Orozco concurred.