Iverson v. State Farm Mut. Ins. Co.

• Decision Date: 01 July 2011
• Docket Number: No. 20081016.,20081016.
• Citation: 256 P.3d 222,2011 UT 34,685 Utah Adv. Rep. 28
• Parties: Joni M. IVERSON, individually and as personal representative for the Estates of Carter and Glenada Iverson, Plaintiff and Appellant,v.STATE FARM MUTUAL INSURANCE CO., Defendant and Appellee.
• Court: Utah Supreme Court

256 P.3d 222

685 Utah Adv. Rep. 28

2011 UT 34

Joni M. IVERSON, individually and as personal representative for the Estates of Carter and Glenada Iverson, Plaintiff and Appellant,

v.STATE FARM MUTUAL INSURANCE CO., Defendant and Appellee.

No. 20081016.

Supreme Court of Utah.

July 1, 2011.

James R. Hasenyager, Peter W. Summerill, Ogden, for plaintiff.Paul M. Belnap, Stuart H. Schultz, Andrew D. Wright, Andrew B. McDaniel, Salt Lake City, for defendant.Justice NEHRING, opinion of the Court:

INTRODUCTION

¶ 1 We have accepted certification of the following question from the United States District Court for the District of Utah: “Whether provision of lower limits for underinsured motorist coverage than for liability coverage properly complies with former Utah Code Ann. § 31A–22–305(9)(b) & (g) (currently codified under Utah Code Ann. § 31A–22–305.3).” We hold that such coverage may comply with the Utah Code so long as the insurer satisfies the consumer notification requirements contained in section 31A–22–305(9)(b) and (g) (the “UIM Statute”).¹ Because notification requirements differ depending on when the insured's policy was issued, a court must first determine whether a new policy existed on or after January 1, 2001. We hold that a new policy exists on or after this date when the insurer and the insured enter into a new contractual relationship, or if changes are made to the terms of an existing insurance contract that materially alter the levels of risk contained in the contract.

BACKGROUND

¶ 2 Carter and Glenada Iverson (the “Iversons”) were insured by State Farm Mutual Insurance Company (“State Farm”) for over twenty years. The Iversons purchased their first policy with State Farm in 1981 for coverage of a 1981 Pontiac Firebird under policy number 479 7848–804–44. In 1990, the Iversons replaced their Firebird with a 1984 Dodge van, and both their policy and policy number were updated to reflect this change. In March 1997, because the Iversons' contractual relationship with State Farm lapsed for a period of time, State Farm issued a new policy number: 479 7848–804–44B. In August 1997, State Farm terminated that policy and reinstated the Iversons' coverage under policy number 479 7848–804–44C. In October 1997, the Iversons added a new vehicle to their policy, a 1995 Chevy van, and State Farm issued policy number 479 7848–804–44D along with that change. Also in 1997, the Iversons changed the principal driver on the policy from Carter Iverson to his son, Rex Iverson, a change that increased the Iversons' premium from $162.90 to $350.02.

¶ 3 On February 27, 2001, State Farm sent the Iversons a renewal notice with an insert that informed the Iversons of the costs and benefits associated with uninsured motorist (“UM”) and underinsured motorist (“UIM”) coverage. State Farm sent the Iversons the same insert again in their next four renewal notices in August 2001, February 2004, August 2004, and February 2005.

¶ 4 In August 2001, State Farm changed its Policy Booklet Form, a form that was incorporated into all of the policies it issued, and added a new policy number in its statement to the Iversons: 479 7848–804–44E. And in April 2003, the Iversons added a 2001 PT Cruiser as an additional vehicle to their coverage, and State Farm issued a new policy number to reflect this final change: 479 7848–804–44F.

¶ 5 At no point during its twenty-four year insurance relationship with the Iversons did State Farm obtain a written waiver from either Carter or Glenada Iverson affirmatively authorizing State Farm to issue the Iversons UIM coverage in an amount less than their liability coverage.

¶ 6 In July 2005, Carter and Glenada Iverson were killed in a head-on collision with an underinsured motorist while driving the 2001 PT Cruiser covered by their policy with State Farm. Joni Iverson, as personal representative of the Iversons' estate, requested that State Farm provide UIM coverage in an amount equal to the liability policy limits of $50,000 for one person and $100,000 for two or more persons. State Farm instead offered $20,000, the limit under the Iversons' policy as written for UIM claims. As a result of this discrepancy, Joni Iverson sued State Farm in the United States District Court for the District of Utah.

¶ 7 Ms. Iverson argues that State Farm was required to obtain a written waiver under Utah Code section 31A–22–305(9)(b) before it could provide UIM coverage in an amount less than the liability policy limits because the changes made to the Iversons' policy since January 1, 2001, made that policy a “new policy” under the UIM Statute. State Farm does not dispute that it did not obtain a written waiver from the Iversons. Instead, State Farm claims that a written waiver was not required because it never issued the Iversons a new policy. The federal district court certified the following question for our resolution: “Whether provision of lower limits for underinsured motorist coverage than for liability coverage properly complies with former Utah Code Ann. § 31A–22–305(9)(b) & (g) (currently codified under Utah Code Ann. § 31A–22–305.3).” We have jurisdiction under Utah Code section 78A–3–102(1) (Supp.2010).

STANDARD OF REVIEW

¶ 8 “A certified question from the federal district court does not present us with a decision to affirm or reverse a lower court's decision; as such, traditional standards of review do not apply. On certification, we answer the legal questions presented without resolving the underlying dispute.” ²

ANALYSIS

¶ 9 The federal district court has asked us to determine whether an insurer may provide lower limits for underinsured motorist coverage than for liability coverage under Utah law. We hold that such coverage may comply with Utah law so long as the insurer follows the consumer notification requirements contained in the Utah Code. We approach the federal district court's question by first examining the UIM Statute's notification requirements and explaining why those requirements necessitate a determination of whether a new policy was created on or after January 1, 2001. We then analyze the meaning of “new policy” under the UIM Statute. We conclude that the meaning of “new policy” includes not only new contractual relationships but also material changes that are made to existing policies. Finally, we explain how a court determines when material changes to an existing insurance policy create a “new policy” for which the statute requires insurers to obtain a signed waiver of UIM motorist coverage.

I. A COURT MUST FIRST EXAMINE WHETHER A POLICY WAS CREATED ON OR AFTER JANUARY 1, 2001, TO DETERMINE WHETHER AN INSURER HAS COMPLIED WITH THE UIM STATUTE'S CONSUMER NOTIFICATION REQUIREMENTS

¶ 10 The Utah Code requires that an insurer take different actions regarding UIM coverage based on when the policy was created. As a result, a court must first determine whether a “new policy” existed on or after January 1, 2001, before it can ascertain whether an insurer has complied with the UIM Statute.

¶ 11 When we interpret Utah statutes,

Our primary goal ... is to evince the true intent and purpose of the Legislature. We do so by first looking to the statute's plain language, and giv[ing] effect to the plain language unless the language is ambiguous.... [W]e read the plain language of the statute as a whole, and interpret its provisions in harmony with other statutes in the same chapter and related chapters. ³

¶ 12 The language of both the 2000 and more recent versions of the UIM Statute is clear: insurance policies existing before January 1, 2001, trigger different UIM coverage notification requirements than do new policies written on or after that date. Utah Code section 31A–22–305(9)(b) governs “new policies written on or after January 1, 2001,” and Utah Code section 31A–22–305(9)(g) governs policies that existed before that date. Under section 9(b), new policies written on or after January 1, 2001, must provide UIM coverage with limits “equal to the lesser of the limits of the insured's motor vehicle liability coverage or the maximum [UIM] coverage limits available by the insurer under the insured's motor vehicle policy, unless the insured purchases coverage in a lesser amount by signing an acknowledgment form ... that waives the higher coverage.” ⁴ That acknowledgment form must “reasonably explain[ ] the purpose of [UIM] coverage” and “disclose[ ] the additional premiums required to purchase [UIM] coverage” equal to the policy's liability coverage or the maximum limit available by the insurer under the policy, whichever is less.⁵ Without the waiver, the UIM Statute mandates that the UIM coverage limits of these new policies “ shall be equal to” the lesser of either the policy's liability limits or the maximum limit the insurer provides under that policy.⁶

¶ 13 In contrast, section 9(g) of the UIM Statute provides that written waivers are not required for insurers to provide UIM coverage with lower limits than the policy's liability limits if the policy is not “new” as of January 1, 2001. Instead, the statute requires only that insurers send with the first 2 renewal notices after January 2001, “an explanation of the purpose of [UIM] coverage and the costs associated with increasing the coverage in amounts up to and including the maximum amount available by the insurer under the insured's motor vehicle policy.” ⁷

¶ 14 Because the consumer notification requirements differ depending on whether a new policy was created on or after January 1, 2001, the definition of “new policy” becomes central to determining the insurer's obligations under the statute. We now explain the meaning of this term.

II. A POLICY IS “NEW” UNDER THE UIM STATUTE WHEN A NEW CONTRACTUAL RELATIONSHIP ARISES ON OR AFTER JANUARY 1, 2001, OR MATERIAL CHANGES TO THE TERMS OF AN EXISTING INSURANCE CONTRACT ALTER THE RISK RELATIONSHIP BETWEEN THE INSURER AND THE INSURED

¶ 15 Although the plain language of the UIM Statute signals that ...