Employers Should Inform Employees of Election to Reject Underinsured Motorist Coverage
An uninsured or underinsured motorist endorsement (UM/ UIM coverage) provides for a driver to receive damages for any injury he or she receives from a negligent driver who either does not have insurance or inadequate insurance.
Case Involving Underinsured Motorist Coverage
Each state regulates the coverage form and requirements. For example, Pennsylvania requires all drivers purchase a $15K per person / $30K per accident bodily injury limit. Most commercial clients purchase a $1M limit. However some elect to purchase only the minimum limit required by State law because:
- Their drivers are not permitted to take vehicles home in the evening and therefore they only drive vehicles on company business.
- If an employee is injured while driving on company business he/she will receive workers compensation benefits including unlimited medical and lost wage benefits in accordance with State Law.
- Purchasing higher underinsured motorist limits can lead to fraudulent claims of injuries caused by a phantom vehicle (hit and run?) in an effort to collect up to an additional $1M from their employer’s auto policy in addition to their workers compensation benefits.
The Case of Bielec v. American International Group
In the case of Bielec v. American International Group Inc., John Bielec was a driver for Verizon. Verizon decided to reject the offer of higher limits for underinsured motorist coverage based in part to the logic above and was required to sign a Rejection Form.
A Verizon employee, John Bielec, was in the course and scope of his employment as a driver for Verizon. At a traffic light he was struck by a vehicle insured for the minimum bodily injury damage limits under the law. Bielec sustained serious injuries, pain and suffering in excess of the other driver’s limits. Bielec then made an underinsured motorist claim against Verizon’s auto policy.
The Case Sets a New Precedence
The insurer denied these benefits based on the signed underinsured motorist rejection form. Neither Bielec nor any other Verizon employee, were notified of their employers rejection of the offer for higher limits. Bielec’s attorneys argued that perhaps, had they known, they would have chosen to purchase the coverage themselves.
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The court decided in favor of Bielec indicating the employers rejection of underinsured motorist coverage was void because the employer failed to notify their employee drivers of the rejection. The court felt employees should have knowledge of the rejection so that they may have the opportunity to obtain underinsured motorist coverage on their own to protect themselves and their families.
While this may not be our recommendation, this case suggests employers should notify their employees of any rejection of any offers of higher underinsured motorist limits. We are also confused by the court’s notion and employee could purchase higher limits on their own as we are not aware of such a product in the insurance marketplace.
Gerry Sorge is a claims advocate at KMRD Partners Risk & Insurance Solutions, a leading risk management consulting firm and property-casualty insurance broker based in Warrington, Pa.
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Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from a KMRD risk professional before taking any action.