Whelan v. State Farm – Insurer Must Have Written Rejection of UIM Coverage

In North Carolina, insurers are required to offer underinsured and uninsured motorist protection as part of their auto insurance coverage. Additional fees are charged for this coverage, but drivers who choose to decline it can do so through a formal written rejection.
Our Charlotte car accident lawyers do not recommend any driver decline UIM coverage, as one can never be sure when they will encounter a driver who is either not insured or not adequately insured. UIM coverage protects injured parties in these instances.

Still, insurers are notorious for seeking to avoid paying these claims. We are dedicated to ensuring that when you pay for UIM coverage – or when rejection of the policy was inadequate – you will get the coverage you deserve.

In the recent case of Whelan v. State Farm Mutual Auto Ins. Co., the New Mexico Supreme Court weighed a case stemming from a UIM coverage dispute.

Similar to North Carolina, New Mexico requires drivers to sign a formal written rejection of UIM coverage in order to legally release the insurer from having to pay those benefits. The court established this requirement in 2010, with its decision in Jordan v. Allstate Ins. Co.

The year after the Jordan decision was handed down, a man made a claim for reformation of the insurance policy that was in effect in 2002, when his father was in an accident that resulted in critical injuries and, six years later, death. The father had been inside the plaintiff’s parked truck when it was struck by another vehicle.

At the time, the occupants of the truck were covered by the plaintiff’s insurance policy that was capped at $50,000 and provided no UM or UIM coverage. Medical bills alone at the time of death had cost the family well over $100,000.

The plaintiff received only the $25,000 policy limit from the at-fault driver. He sought an additional $25,000 from his own insurer in order to equalize the payout with his own coverage. His insurer refused, citing the plaintiff’s lack of UIM/UM coverage.

The plaintiff filed a motion for declaratory judgment in an effort to invalidate his previous rejection for such coverage, citing the new statute with specific requirements for how such policies should be rejected.

The district court granted the plaintiff’s motion for summary judgment, finding that UIM/UM coverage should be equalized with policy limits. The insurer appealed, and the Court of Appeals certified questions in the case to the state supreme court.

Aside from arguing the policy had no UIM coverage, the insurer asserted it could not cover claims made more than six years after the date of the underlying accident. The state supreme court found this element of the contract was not reasonable and therefore not enforceable.

However, the court indicated it could not retroactively impose the requirements established in Jordan to a case that had begun many years earlier.

That means, unfortunately, the plaintiff will not receive UIM coverage for his father’s death. Scenarios like this can be avoided by ensuring you have UIM and UM coverage on your auto insurance policy.

Contact the North Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.

Additional Resources:
Whelan v. State Farm Mutual Auto Ins. Co., June 16, 2014, New Mexico Supreme Court

More Blog Entries:
Kahihu v. Brunson – NC Car Accident Victim Loses Appeal of Directed Verdict for Insurer, June 6, 2014, Charlotte Car Accident Lawyer Blog

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