Court: State Farm should've used different form

CHARLESTON - An insurance company’s failure to use the state Insurance Commissioner’s prescribed forms when offering underinsured motorist (UIM) coverage results in the loss of the statutory presumption of compliance with state law, the state Supreme Court ruled.

In an Oct. 7 opinion delivered by Justice Margaret Workman, the high court held that the plain language of West Virginia code §33-6-31d regulating UIM, requires that an insurer must use the commissioner’s form in order to gain the “benefit of the statutory presumption that (1) its offer of UIM coverage was effective, and (2) the insured’s rejection of such coverage was knowing and intelligent.”

The question over required use of the forms arose from a Mason County Circuit Court case relating to a civil suit filed after a car accident.

On May 4, 2007, Angela Thomas spoke with a State Farm representative in Point Pleasant about automobile liability insurance. According to court documents, Thomas agreed to buy a liability policy from State Farm for coverage up to $100,000 per person and $300,000 per occurrence for bodily injuries.

The agent also offered Thomas UIM coverage and explained the purpose of it, the limits available for purchase and the cost of each available limit. Thomas declined the UIM coverage and signed a form indicating she understood the coverage and was exercising her right to reject it.

In August 2009, Thomas, her husband and son were seriously injured after a car driven by William Ray McDermitt “negligently crossed the center line and collided with the Thomas vehicle.”

Because the Thomas family’s injuries exceeded the available liability coverage under McDermitt’s automobile liability policy, the Thomas family filed an underinsured motorist claim with State Farm despite Angela Thomas’ rejection of the “purported rejection of such coverage in May 2007.”

State Farm denied coverage for the car accident. Thomas then filed suit against McDermitt and against State Farm in August 2011, alleging that State Farm’s policy must be reformed to include UIM coverage and State Farm’s refusal to provide UIM benefits constituted a breach of the insurance contract.

The plaintiff also asserted that it did not provide a knowing and intelligent waiver of the UIM coverage.

In April 2012, the circuit court granted Thomas’ motion for partial summary judgment after concluding State Farm’s UIM selection and rejection form did not comply with the insurance commissioner’s form.

Both parties agreed that the UIM form Thomas signed included all the elements required by the insurance commissioner. The only difference was that State Farm’s contained additional elements that “arguably render the form difficult to understand and more complicated than necessary.”

The circuit court ruled that the failure to use the exact form prescribed by the insurance commissioner resulted in the addition of UIM coverage to the policy as a matter of law.

State Farm appealed the decision, arguing that failing to use the precise form should only result in the loss of presumption that the insurer provided a reasonable offer which was knowingly rejected.

The high court, citing a similar case in which the court was confronted with a form that also provided all the required information but deviated from the insurance commissioner’s prescribed form by including extraneously information that made the form confusing, applied a similar standard holding that the deviation resulted in merely a loss of presumption of commercial reasonableness.