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Ballestros v. American Standard Insurance Company of Wisconsin - 12/23/2009

Arizona Court of Appeals Division Two Holds That A.R.S. § 20-259.01 Does Not Provide an Automatic Safe Harbor From Suit When a Department of Insurance Form is Used to Convey an offer of UM/UIM Coverage When an Insurer Knows or Should Know That Merely Providing the Form Would be Insufficient to Reasonably Convey the Offer to the Potential Insured.

In March 2001, Luis Ballesteros, whose primary language is Spanish, purchased automobile insurance from American Standard Insurance Company of Wisconsin (“American Standard”).  Ballesteros received a form for the selection or rejection of uninsured/underinsured motorist (“UM/UIM”) coverage that was written only in English.  Ballesteros signed the form indicating he rejected UM/UIM coverage.  Ballesteros filed suit after he was denied UM/UIM coverage.  American Standard filed two motions for partial summary judgment, which were denied by the trial court.  Ballesteros then filed a motion for partial summary judgment on the issue of whether American Standard violated A.R.S. § 20-259.01by failing to provide him with the UM/UIM coverage form in Spanish.  The trial court granted this motion and entered judgment for Ballesteros on the breach of contract claim.  American Standard timely appealed.   

A.R.S. § 20-259.01 requires every insurer offering automobile or motor vehicle liability policies to offer the insured written notice of the availability of UM/UIM coverage.  The statute also provides that the “selection of limits or rejection of coverage by a named insured or applicant on a form approved by the director is valid for all insureds under the policy.”  On appeal, American Standard argued that this second sentence provides a safe harbor to insurers, insulating them from litigation where an approved form is used.  The Arizona Appeals Court rejected this argument.  In Giley v. Liberty Mutual Fire Ins. Co., the Arizona Supreme Court held that § 20-259.01 requires insurers to convey the offer of UM/UIM coverage in a way that is reasonably calculated to bring to the insured’s attention that whch is being offered.  Finding nothing in the legislative history to suggest that by adding the second sentence of § 20-259.01, the legislature intended to overrule Giley, the Court concluded that the use of a Department of Insurance form in this instance was insufficient.  The Court reasoned that when an insurer knows or should know that merely providing the offer form approved by the Department of Insurance would be insufficient to convey the offer of coverage to a potential insured because the insured cannot read the form, the insurer must take additional steps reasonably calculated to ensure the offer is communicated effectively.  This does not necessarily mean that the insurer was required to provide a Spanish language form however.  Thus, the Court affirmed the trial court’s denial of American Standard’s motions for partial summary judgment.

Regarding Ballesteros’ motion for partial summary judgment, the Court reversed the court’s entry of partial summary judgment for Ballestros and remanded for further proceedings because it concluded that a factual dispute existed regarding the steps taken by American Standard to convey the offer of UM/UIM coverage to Mr. Ballesteros. 

Judge Vásquez authored the opinion, Judges Eckerstrom and Brammer concurred.

Posted By: Kristin Windtberg 

Posted On: 1/8/2010