Court: Penn. Insurer’s Fine Print Negated Coverage Rejection

The Pennsylvania Superior Court ruled on Monday that some additional language included in a form that Unitrin policyholders sign to reject underinsured motorist coverage actually invalidated the rejection form, meaning that many of Unitrin’s Pennsylvania automobile insurance policyholders could be entitled to compensation under a type of coverage they chose to reject.

All Pennsylvania car insurance policies by default include uninsured/underinsured motorist (UM/UIM) coverage, which provides coverage when the policyholder is injured in a car accident caused by an uninsured, underinsured, or hit-and-run driver.

But drivers can reject this coverage by signing a form contained in the pages of their auto policies. The language of that form is dictated by law so that this section of all Pennsylvania policies reads the same way.

Unitrin, however, added an extra 20 words to the statement policyholders sign to reject the coverage.

The extra sentence seemed innocuous enough to Unitrin and the trial court that ruled in the insurer’s favor: “By rejecting this coverage, I am also signing the waiver on P. 13 rejecting stacked limits of underinsured motorist coverage.”

The opinion of both Unitrin and the lower court was that the additional sentence was “clarifying” language that did not affect the terms of the rejection.

But a majority of state Superior Court judges who reviewed one Unitrin policyholder’s appeal said the fact that the language deviated from what had been prescribed in the state’s financial responsibility law is enough to make the Unitrin UM/UIM rejection void.

The lower court’s decision was reversed.

Decision Could Be Significant for Unitrin Policyholders Who Have Made UIM Claims

The case originated in July 2009 when Unitrin policyholder Lee Jones was injured in an accident while riding as a passenger.

After being treated for injuries, it turned out that Jones’s damages exceeded the limits of the at-fault driver’s bodily injury liability policy–a scenario in which underinsured motorist coverage would kick in and cover the remaining damages.

But Jones had signed the UIM rejection form, meaning she would likely have to pay for the remaining damages out of pocket.

After Unitrin denied her claim, the two parties went to court over whether the rejection form Jones had signed complied with state statutes and, in effect, whether she was covered under the policy. The trial court said the language did not negate the policy and sided with Unitrin in the end, but the Superior Court ruling reversed that decision.

This may not be the end of the Unitrin case. But if the Superior Court’s decision is upheld, it could mean drivers who were denied UIM benefits because they had rejected the coverage may still be able to collect for their damages.