In the case of Gibson v. State Farm Mut. Auto. Ins. Co., No. 20-1609 (3d Cir. Jan. 21, 2021), the Third Circuit of Pennsylvania reversed the lower court’s decision to mold the UIM limits of coverage finding that the Section 1734 of the PMVFRL requires only that the insured make a “request in writing” when opting for a lower amount of underinsured motorist coverage.
In the Gibson case, the insured signed an insurance application for bodily injury coverage of $250,000 but opted for $100,000 in stacked UIM coverage for the total UIM coverage of $300,000. The application included a signature block below language attesting that “the limits and coverages [in the application] were selected by me.” Gibson signed the application and the policy was issued effective April 22, 2016.
Soon after signing the application, Gibson was seriously injured in a motor vehicle accident. Gibson, however, did not sign other required documents including an acknowledgment of coverage selection form for UIM until approximately 3 weeks after she was in the accident. This form contained an acknowledgment that the insured was given an opportunity to purchase UIM coverage with limits up to her liability coverage for bodily injury but she instead selected the lower limits of UIM coverage. Gibson signed this form confirming her election of lower UIM limits after she had been injured in the car accident with no evidence being presented that she objected to the documents that she signed during the application process.
The question for the Court to decide in Gibson was whether her application for insurance in which she opted for decreased UIM coverage of $100,000 was sufficient to satisfy Section 1734 of the PMVFRL. When reviewing the plain text of the statute, the Court found that Section 1734’s minimal requirement of a “request in writing” was met. The Court noted that Section 1734 intended to provide a “very simple, clear cut rule for an insurance company to follow – to lower the limits [of underinsured or uninsured motorist coverage] it must insist on a written authorization signed by the named insured.” It was further noted that the Pennsylvania Supreme Court has emphasized that Section 1734’s requirements are minimal, plain and unambiguous. See Orsag v. Farmers New Century Ins., 15 A.3d 896, 901 (Pa 2011). In Orsag, the Supreme Court held that an insurer satisfies Section 1734 when the writing contains the signature of the insured and an express designation of the coverage requested.
The Court further found that Gibson validly selected lower UIM coverage in her application and the Gibson failed to show that Section 1734’s writing requirement entails a more onerous standard. Rejecting the arguments of Gibson, the Court followed the clear and plain language of 1734 and concluded that Gibson’s signed application clearly opted for lower UIM coverage and Section 1734 requires nothing more for a valid election for reduced coverage. Absent a statutory provision requiring an insurer to provide an additional form or certain magic words, the Court refused to read in or create such a requirement in this case. The Court noted that the Pennsylvania Supreme Court has repeatedly rejected the argument that a separate writing is required to elect lower UIM limits. See, Orsag and Lewis v. Erie Ins. Exch., 793 A.2d 143, 155 (Pa 2002)(Section 1734 writing need not be on a separate page).
Questions regarding this matter can be referred to David Friedman.
