Lopez v. United Auto. Ins. Co.

• Decision Date: 24 February 2012
• Docket Number: No. 20100054.,20100054.
• Citation: 703 Utah Adv. Rep. 17,274 P.3d 897,2012 UT 10
• Parties: Maria LOPEZ, Plaintiff and Respondent, v. UNITED AUTOMOBILE INSURANCE COMPANY and El Sol Insurance Agency, LLC, Defendants and Petitioners.
• Court: Utah Supreme Court

2012 UT 10

274 P.3d 897

703 Utah Adv. Rep. 17

Maria LOPEZ, Plaintiff and Respondent,

v.UNITED AUTOMOBILE INSURANCE COMPANY and El Sol Insurance Agency, LLC, Defendants and Petitioners.

No. 20100054.

Supreme Court of Utah.

Feb. 24, 2012.

Daniel F. Bertch, Kevin R. Robson, Salt Lake City, for respondent.

Tim D. Dunn, Michael J. Collins, Salt Lake City, for petitioner.

James W. McConkie, Kenneth D. Lougee, W. Alexander Evans, Salt Lake City, for amici United Automobile Insurance Company's customers.

On Certiorari to the Utah Court of Appeals

Associate Chief Justice DURRANT, opinion of the Court:

INTRODUCTION

¶ 1 We are asked to determine what constitutes a “reasonable explanation” of underinsured motorist (UIM) coverage under section 31A–22–305.3 of the Utah Code (UIM Statute). The UIM Statute provides that an insured “may reject [UIM] coverage by an express writing to the insurer .... on a form provided by the insurer that includes a reasonable explanation of the purpose of [UIM] coverage and when it would be applicable.” ¹ In a lawsuit against United Automobile Insurance Company and El Sol Insurance Agency, LLC (collectively, United), Maria Lopez alleges that United's waiver form for rejecting UIM coverage (Waiver) did not provide the required reasonable explanation of UIM coverage. She contends that, because United's Waiver did not contain a reasonable explanation, it was invalid and she was therefore entitled to UIM coverage. The district court concluded that United's Waiver contained a reasonable explanation of UIM coverage, but the Utah Court of Appeals reversed that decision, holding that the waiver did not contain a reasonable explanation, and Ms. Lopez was therefore entitled to UIM coverage of $25,000 under the UIM Statute. The court of appeals then remanded the case to the district court with instructions that it enter judgment in favor of Ms. Lopez in the amount of $25,000.

¶ 2 We granted certiorari to resolve two issues: (1) whether the court of appeals erred in its construction and application of the meaning of the phrase “reasonable explanation,” as required by the UIM Statute; and (2) whether the court of appeals erred in failing to remand the case for ascertainment of the amount of damages.² We hold that the court of appeals did not err in its construction and application of the meaning of the phrase “reasonable explanation.” But the court of appeals did err in instructing the district court to enter judgment for Ms. Lopez in the amount of $25,000. We therefore remand the case to the district court with instructions to determine the amount of damages Ms. Lopez actually sustained.

BACKGROUND

¶ 3 On February 1, 2007, Miriam Salazar purchased an insurance policy from United, selecting uninsured motorist coverage equal to her bodily injury liability limits of $25,000, but rejecting underinsured motorist coverage by signing United's Waiver. Under the heading “Agreement Deleting Uninsured/Underinsured Motorists Bodily Injury Coverage,” United's Waiver read as follows:

Utah Insurance Code Section 31A–22–305 requires that every automobile policy include Uninsured/Underinsured Motorists Bodily Injury Coverage with limits equal to the Bodily Injury limit, unless you select a different limit than your Bodily Injury Coverage or reject the Uninsured/Underinsured Motorists Bodily Injury Coverage entirely. Uninsured/Underinsured Motorists Bodily Injury Coverage provides payment of certain benefits for damages caused by the owner or operator of uninsured/underinsured motor vehicles because of bodily injury, sickness, disease or death.

¶ 4 A few days after her purchase, Ms. Salazar was driving the vehicle covered by the insurance policy when another automobile struck her vehicle from behind. Ms. Lopez, a passenger in Ms. Salazar's vehicle, was injured in the accident. The other driver's insurer tendered its limit of $25,000 to Ms. Lopez to pay for the injuries she sustained. Claiming that this amount was insufficient to cover her damages, Ms. Lopez sued United, arguing that United must provide her with UIM coverage because its Waiver did not provide the reasonable explanation of UIM coverage required by the UIM Statute.³

¶ 5 The parties filed cross-motions for summary judgment. The district court determined that United's Waiver contained a reasonable explanation of UIM coverage and, accordingly, granted summary judgment in favor of United. But on appeal, the court of appeals concluded that United's Waiver did not contain a reasonable explanation.⁴ Specifically, the court of appeals concluded that, because the explanation in United's Waiver was not sufficient to “enable [the insured] to make an intelligent, informed decision regarding the selection of UIM coverage[,] ... [the] waiver of UIM coverage was invalid.” ⁵ The court of appeals remanded the case and instructed the district court to enter judgment in favor of Ms. Lopez in the amount of $25,000.⁶

¶ 6 On appeal to this court, Ms. Lopez contends that United's Waiver failed to provide a reasonable explanation of UIM coverage, primarily because it did not define UIM coverage or explain its purpose or benefits.⁷ As a result, Ms. Lopez claims that she is entitled to $25,000 of UIM coverage under the UIM Statute. United chiefly argues that the explanation in the Waiver was reasonable because its language mirrors a provision of the UIM Statute, and that an ordinary person would understand the explanation without further information. Although United does not dispute that Ms. Lopez is entitled to the statutorily mandated amount of UIM coverage if we find that its Waiver did not contain a reasonable explanation, it contends that, rather than instructing the district court to enter judgment for Ms. Lopez in the amount of $25,000, the court of appeals should have instructed the district court to ascertain the amount of damages that Ms. Lopez actually incurred.

¶ 7 We have jurisdiction to hear this matter pursuant to section 78A–3–102(3)(a) of the Utah Code.

STANDARD OF REVIEW

¶ 8 “On certiorari, we review a decision of the court of appeals for correctness. The correctness of the court of appeals' decision turns on whether that court accurately reviewed the district court's decision under the appropriate standard of review.” ⁸

ANALYSIS

I. THE COURT OF APPEALS CORRECTLY HELD THAT UNITED'S WAIVER FAILED TO PROVIDE THE REASONABLE EXPLANATION REQUIRED BY STATUTE

¶ 9 We first consider whether the court of appeals erred in its construction and application of the “reasonable explanation” required by the UIM Statute. For a waiver of UIM coverage to be valid, the UIM Statute requires that the written rejection must “be on a form provided by the insurer that includes a reasonable explanation of the purpose of [UIM] coverage and when it would be applicable.” ⁹ Because neither party disputes that the rejection was written on a form provided by United, we consider only whether United's Waiver included the required reasonable explanation. To resolve this question, we must determine (A) whether the court of appeals correctly construed the meaning of the phrase “reasonable explanation” and (B) whether United's Waiver provided the reasonable explanation of UIM coverage required by statute.

A. Under the UIM Statute, a “Reasonable Explanation” Requires Insurers to Provide Information Sufficient to Allow a Consumer to Make an Informed Decision Regarding the Selection of the Coverage

¶ 10 Because the UIM Statute does not define the phrase “reasonable explanation,” we must use our rules of statutory interpretation to determine its meaning. When interpreting a statute, “our primary goal is to evince the true intent and purpose of the Legislature.” ¹⁰ To accomplish this goal, “we first look to the plain language of the statute.” ¹¹ “[W]e read the language of the statute as a whole and also in its relation to other statutes.” ¹² We also “read each term according to its ordinary and accepted meaning.” ¹³ Additionally, we “assume that each term included in the statute was used advisedly, and we seek to give effect to every word, clause[,] and sentence[,] ... if such can be reasonably done.” ¹⁴

¶ 11 Both the language and the purpose of the UIM Statute make clear that the “reasonable explanation” requirement is meant to ensure that consumers have sufficient information to allow them to make informed decisions regarding the selection of UIM coverage. The term “reasonable” is defined as “[f]air, proper, or moderate under the circumstances.” ¹⁵ And the term “explain” is defined as “to make known” or “to make plain or understandable.” ¹⁶ An ordinary person reading the phrase “reasonable explanation” would understand it to mean the provision of a proper amount of information to allow one to understand a concept.

¶ 12 Further, we recently recognized that the UIM Statute “was passed in response to an urgent concern that citizens of the state did not understand the consequences of not carrying ... [UIM] coverage,” ¹⁷ and that it “was designed to affirmatively inform consumers about ... UIM coverage.” ¹⁸ Accordingly, we held that the UIM Statute requires insurers to present consumers “with the information they need to make an informed decision about ... UIM coverage.” ¹⁹ Thus, based on the language and purpose of the UIM Statute, the phrase “reasonable explanation” requires insurers to provide sufficient information to allow consumers to make informed decisions regarding the selection of UIM coverage.

¶ 13 United asserts that its Waiver necessarily provided a reasonable explanation because it contained language that mirrored the statutory definition of UIM coverage. We reject United's argument for the following two reasons. First, although it provides helpful information about UIM coverage, the statutory definition alone is insufficient to adequately inform consumers of the purpose and applicability of UIM coverage. The statutory definition reads as follows: “[UIM] coverage ... provides...