By Alex Trueblood, O’Ryan Law Firm
In Lee v. Liberty Mutual Fire Insurance Co., the Indiana Court of Appeals examined the question of whether an automobile insurer is entitled to offer underinsured motorist benefits (UIM) coverage in an amount below the bodily injury liability coverage limits of the underlying policy.
Lee was driving his employer’s vehicle when he was struck and severely injured by another motorist who crossed the center line. The employer’s vehicle was insured by Liberty Mutual for $2,000,000 in bodily injury liability coverage and $60,000 in UIM benefits coverage. Lee filed suit against the other driver and Liberty Mutual and settled with the other driver for $225,000 – the limits of her personal auto insurance policy. Lee continued his claim for UIM benefits against Liberty Mutual.
Ind. Code § 27-7-5-2 requires a company offering auto insurance in Indiana to offer UIM coverage in an amount at least equal to the limits of the bodily injury liability coverage offered under the underlying policy. However, the statute also provides that a named insured can reject the UIM coverage via a written statement acknowledging that the insured is rejecting the UIM coverage. Ind. Code § 27-7-5-2(b), (c). In this case, when the employer purchased the insurance covering the vehicle Lee was driving, its agent declined to outright reject UIM coverage and instead elected an option to purchase only $60,000 in UIM coverage.
Lee challenged the employer’s election of $60,000 in UIM coverage, arguing that Ind. Code § 27-7-5-2(b) and (c) provide only a limited exception to the rule requiring insurers to offer UIM coverage in an amount equal to or greater than the underlying bodily injury liability coverage. Lee argued that since the statute only explicitly authorizes a complete rejection of UIM coverage, his employer’s election of $60,000 in UIM coverage was invalid and the policy was therefore required to provide at least $2,000,000 in UIM coverage.
Citing Marshall v. Universal Underwriters Ins. Co., 673 N.E.2d 513 (Ind. Ct. App. 1996), reh’g denied, disapproved of on unrelated grounds by United Nat. Ins. Co. v. DePrizio, 705 N.E.2d 455 (Ind. 1999), the Court of Appeals reasoned that Ind. Code § 27-7-5-2 only requires an insurer to offer UIM coverage in an amount at least equal to the underlying bodily injury liability coverage. Where an insured rejects that offer, the insurer is free to provide UIM coverage with limits less than the underlying bodily injury liability coverage. Accordingly, the court rejected Lee’s argument and affirmed the trial court’s summary judgment in favor of Liberty Mutual.
Although Lee does not break new legal ground on UIM coverage limits, it serves as a useful affirmation that the rule set forth in Marshall 23 years ago remains good law. In practice, it appears that policies providing UIM benefit limits less than the underlying bodily injury liability limits will likely be enforceable unless a claimant can prove some defect in the insured’s written rejection of the insurer’s offer to provide UIM benefits equal to or greater than the underlying bodily injury liability limits.
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