Plaintiff Martina Ramos Melendez was involved in collision in which the at-fault driver’s liability limits did not cover Melendez’s and her passengers’ damages. Melendez filed an underinsured motorist (“UIM”) claim with her insurer, defendant Hallmark Insurance Company (“Hallmark”). Hallmark denied the claim based on Melendez’s execution of a form rejecting uninsured motorist (“UM”) and UIM coverage (the “Form”). Melendez filed suit and moved for partial summary judgment, arguing that she was entitled to UIM coverage because the Form did not constitute an offer of UM/UIM coverage, and thus violated A.R.S. § 20-259.01. The trial court granted Hallmark’s cross-motion for summary judgment, and Melendez timely appealed.
The Arizona Appeals Court reversed and remanded. A.R.S. § 20-259.01(A) and (B) require an insurer to “make available . . . and . . . by written notice offer the insured” UM and UIM coverage. Incorporating contract principles as required under Tallent v. National General Insurance Co., 185 Ariz. 266, 915 P.2d 665 (1996), the Court held that Hallmark’s Form did not constitute an offer. The Court explained that the Form did not establish to a reasonable person that “that an offer has been made and that, upon acceptance, the offeror would be bound.” Ballesteros v. Am. Standard Ins.Co. of Wisc., 226 Ariz. 345, 348, ¶ 13, 248 P.3d 193, 196 (2011). Although the Form indicated that UM/UIM coverage was available (and could be rejected), it did not include any premium amounts for various levels of UM/UIM coverage—meaning that the insured did not know the price of the coverage offered—and stated that “no coverage is provided by this document.”
The Court relied, in part, on Arizona Department of Insurance Regulatory Bulletin 2003-3, which sets forth a sample form for offering UM/UIM coverage that conflicts with Hallmarks’ Form. The Court also relied on a 2010 letter of non-compliance from the Department stating that Hallmark’s Form was deficient. The Court explained that administrative agencies are entitled to deference in carrying out specific duties, such as the Department’s duty to regulate insurance forms.
The Court rejected Hallmark’s arguments that its decision conflicted with the Arizona Supreme Court’s decision in Ballesteros that UM/UIM forms do not have to be in Spanish, explaining that this case involves objective information provided to an insured, rather than the insured’s subjective understanding of a form. The Court also held that Garcia v. Farmers Insurance Company of Arizona, 191 Ariz. 410, 411-12, 956 P.2d 537, 538-39 (App. 1998) was wrongly decided, and distinguished it on the basis that it was decided before Ballesteros, did not involve a form stating that no coverage was provided by the document, and did not involve Department disapproval.
Judge Kessler authored the opinion; Presiding Judge Brown concurred. Judge Gould dissented.
Posted by: Sharad H. Desai.