The Supreme Court of Alaska will decide whether state law requires that personal auto insurance companies include price terms when offering optional uninsured/underinsured motorist coverage limits. The court will also determine the appropriate remedy for improper or inadequate offers of UIM limits in the case of GEICO v. Graham-Gonzalez.
At issue is whether GEICO’s UIM selection form complied with the requirements of Alaska law. The Alaska Superior Court reportedly concluded that the insurer had failed to properly offer the higher UIM coverage options by not including advance-pricing information. The court also ruled that the appropriate remedy was to allow the plaintiff, a GEICO policyholder, to retroactively purchase UIM coverage at the statutory maximum of $1 million, even though the plaintiff at no point throughout her three-year insured period sought to select different UIM limits.
The National Association of Independent Insurers (NAII) filed a friend-of-the-court brief before the Supreme Court of Alaska in support of GEICO in the case, addressing both the price term offerings and appropriate remedy issues. The NAII brief argues that requiring insurers to include price terms for each optional UIM limit would “impose an impractical and unnecessary burden on the insurance industry.”
“To compel companies to provide this information fails to appreciate all the variables that ultimately go into insurance transactions, such as individual insurance needs and individualized factors like driving history, age, and location that may influence pricing,” Monika McGuire, NAII assistant general counsel, legal services, said. “Nothing in the statute requires insurers to provide pricing information of their UIM coverage offers. Related case law supports the same conclusion.”
Even if the UIM coverage cost information is deemed to be required under the statute, the remedy should not be to automatically provide the maximum optional limits offered for UIM coverage, as argued by the plaintiff. The Supreme Court of Alaska has repeatedly held that “reformation” is appropriate only where UIM coverage is required, not optional. Even then, the contract should only be reformed to the minimum, not the maximum, required limits, McGuire said.
The Alaska Supreme Court has already ruled that the appropriate remedy for failing to offer optional UIM limits is the tort remedy applied in a previous decision, Peter v. Schumacher Enters. In Peter, the court held that the proper remedy is an issue for the “trier-of-fact” in a private tort action, based on the extent of harm sustained by the insured and the level of coverage the insured would have chosen had they been offered the choice.
The NAII brief states that if the court were to adopt the reformation remedy imposed by the trial court, personal automobile insurers writing in Alaska would “face an enormous increase in UIM coverage loss exposure.”
“This increased exposure would inevitably result in increased UIM coverage premiums,” McGuire added. “Clearly, the tort remedy is more appropriate and adequate than a reformation remedy in cases involving optional UIM limits.”
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