Opinion
C.A. No. 01C-09-104 JRS.
Date Submitted: May 19, 2003.
Date Decided: August 13, 2003.
Upon Defendant's Motion for Summary Judgment. DENIED.
Upon Plaintiff's Cross Motion for Summary Judgment. GRANTED.
Louis B. Ferrara, Esquire and James J. Haley, Jr., Esquire. FERRARA, HALEY, BEVIS SOLOMON, 1716 Wawaset Street, P.O. Box 188, Wilmington, Delaware 19899-0188. Attorney for Plaintiff.
Thomas P. Leff, Esquire. CASARINO, CHRISTMAN SHALK, 800 North King Street, P.O. Box 1276, Wilmington, Delaware 19899-1276. Attorney for Defendant.
MEMORANDUM OPINION
I. INTRODUCTION
In this declaratory judgment action, the plaintiff, Joseph D. Shukitt ("Mr. Shukitt"), seeks to reform his automobile insurance policy to increase his uninsured/underinsured motorist ("UM/UIM") coverage to match his liability coverage. The plaintiff and the defendant insurance carrier, United Services Automobile Association ("USAA"), have brought cross motions for summary judgment. The sole issue joined before the Court is whether USAA ever communicated to Mr. Shukitt a meaningful offer of UM/UIM coverage up to the limits of his liability coverage. The issue can be resolved simply by measuring the quality of USAA's offer language against settled principles of Delaware insurance law. Accordingly, the matter is ripe for summary disposition. After reviewing the relevant documents, the Court finds that USAA has not made a meaningful offer of additional UM/UIM coverage to Mr. Shukitt in accordance with Delaware law. USAA's motion for summary judgment is DENIED; plaintiffs cross motion for summary judgment is GRANTED.
II. FACTS
On May 5, 2001, Mr. Shukitt was involved in a collision with another vehicle near the intersection of Foulk Road and Shipley Road in Wilmington. At the time of the accident. Mr. Shukitt's vehicle was insured by USAA with the following coverages: $15,000 per person/$30,000 per accident ("15/30") UM/UIM; $100,000 per person/$200,000 per accident ("100/200") liability. Mr. Shukitt's damages exceeded the tortfeasor's $15,000 minimum liability coverage. Accordingly, he sought to recover UIM benefits under his policy with USAA.
USAA denied Mr. Shukitt's claim for UIM benefits because Mr. Shukitt's UM/UIM coverage was not greater than the tortfeasor's 15/30 liability limits. USAA maintained that Mr. Shukitt failed to accept its offer to increase his UM/UIM limits up to his liability coverage limits, an offer which USAA contends was included in the information packets it sent to Mr. Shukitt at various times over the six years it insured his vehicles prior to the accident.
See DEL. CODE ANN. tit. 18 Del. C. § 3902(b)(2) (1999) ("An underinsured motor vehicle is one for which there may be bodily injury liability coverage in effect, but the limits of bodily injury liability coverage under all bonds and insurance policies applicable at the time of the accident total less than the limits provided by the uninsured motorist coverage."). See also Connell v. Liberty Mut. Ins. Co., 841 F. Supp. 578, 582 (D. Del. 1994) (stating that the term "underinsured" "contemplates a motorist/tortfeasor who causes greater damage to a tort claimant than the motorist/tortfeasor can satisfy out of the motorist's liability insurance.").
USAA sent information packets in 1995 and 1996 when Mr. Shukitt sought to change the vehicles to be insured under the policy ("the `95 and `96 packets"). These packets included a declaration page with a list of coverage and associated costs as well as various forms, including Form 999 (DE). The language that pertains to the "offer" of additional UM/UIM coverage appears in Form 999 (DE):
AUTO INSURANCE IN DELAWARE
We are pleased to serve your auto insurance needs and we want to make sure you are getting the coverage you need. Coverages provided are for you, resident family members and guest passengers. In the explanation below, No-Fault and Uninsured Motorists (UM) coverages are discussed. Then see order form attached if you wish to make a coverage change.
A REMINDER!
The information in this form is a brief, general discussion. Coverages are subject to all the provisions and exclusions contained in your insurance policy. PLEASE READ YOUR POLICY FOR DETAILS OF COVERAGES.
* * * *
UNINSURED MOTORISTS COVERAGE (UM)
— can be rejected. Once rejected, future renewals will remain the same.
— provides protection when you have an accident with an uninsured or a hit-and-run driver. It pays for bodily injury damages or death or property damage (subject to a $250 deductible) when the other person is legally liable for these damages.
— pays for injury caused by a motorist with liability limits less than your UM limits and less than the amount of damages you are entitled to recover. His policy pays its limits first, then yours pays the lesser of (1) the excess, if any, of your UM limits over his liability limits, or (2) any remaining loss. In any event, the combined payments cannot exceed your UM limits.
DETERMINING THE UM LIMITS YOU NEED
Consider sources of protection you already have. UM applies to auto accidents and should be looked upon only as supplemental protection to a full-range income protection and medical expense program. Consider:
— income source. An active duty officer may not need as much protection as a self-employed person.
— medical care coverage from employment sources.
— the portion of income derived from investments, pensions and annuities.
*Note: USAA Life Company now offers Income Replacement and Medical Expense programs in most states. For information call 1-800-531-8000
(D.I. 16, Ex. E and F).
The next section of Form 999 (DE), entitled "Order Form," indicates the coverage options for UM/UIM insurance and the cost for the coverage options. The insured was directed to sign and return the form only if different UM/UIM coverage was selected or the additional coverage was rejected.
Mr. Shukitt does not dispute that USAA sent the `95 and `96 packets, including Form 999 (DE), when he changed the vehicles to be covered under the policy. He also acknowledges that USAA sent policy renewals including Form 999 (DE) and Form 41 (DE) in November 1995, November 1997, and November 1999. Nevertheless, he maintains that the offers of additional UM/UIM coverage were not meaningful because the offer language was ambiguous and buried within a mass of unrelated information. Under these circumstances, Mr. Shukitt contends that USAA failed to meet its statutory obligation to offer UM/UIM coverage up to his limits of liability coverage.
Form 41 (DE) also includes a brief discussion of UM/UIM coverage.
DEL. CODE ANN. tit. 18 Del. C. § 3902(b) (1999)("Section 3902")("Every insurer shall offer to the insured the option to purchase additional coverage for personal injury or death up to a limit of $100,000 per person and $300,000 per accident or $300,000 single limit, but not to exceed the limits for bodily injury liability set forth in the basic policy. Such additional insurance shall include underinsured bodily injury liability coverage.").
Mr. Shukitt has filed a declaratory judgment action in which he seeks reformation of his policy to include UM/UIM coverage to match his 100/200 liability coverage. USAA has moved for summary judgment on the ground that it offered additional UM/UIM coverage to Mr. Shukitt, but he declined to accept it. Mr. Shukitt has cross moved for summary judgment on the ground that USAA's offers were ineffective as a matter of law.
III. DISCUSSION
A. Standard of Review
The fact that the parties have filed cross motions for summary judgment does not change the applicable standard of review:
[T]he existence of cross motions for summary judgment does not act per se as a concession that there is an absence of factual issues. Rather, a party moving for summary judgment concedes the absence of a factual issue and the truth of the nonmoving party's allegations only for purposes of its own motion, and does not waive its right to assert that there are disputed facts that preclude summary judgment in favor of the other party.
United Vanguard Fund, Inc. v. Takecare, Inc., 693 A.2d 1076, 1079 (Del. 1997) (citations omitted).
Essentially, neither party's motion will be granted unless no genuine issue of material fact exists and one of the parties is entitled to judgment as a matter of law. Initially, the moving party must demonstrate that there is no genuine issue of material fact. If that burden is met, the nonmoving party must then show that a issue of material fact remains in dispute.
Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742, 745 (Del. 1997).
Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995)
Id.
B. Section 3902's "Meaningful Offer" Requirement
The question of whether USAA's policy contains a meaningful offer for UM/UIM coverage is a threshold issue of law for the Court to decide. The often-cited case of Morris v. Allstate Insurance Co. explains the relevant inquiry under Section 3902(b):
Drenth v. Colonial Penn Ins. Co., 1997 Del. Super. LEXIS 466, at *5 ("The threshold issue in this case requires a determination of whether Colonial offered Drenth UM/UIM coverage pursuant to 18 Del. C. § 3902(b)."); Knapp v. United Servs. Auto. Ass'n, 1997 Del. Super. LEXIS 384, at *3 — 4 ("There is the legal issue of whether the language is similar enough to that which the Delaware Supreme Court in Mason found not to be a meaningful offer, and whether as to that issue, the Knapps are entitled tojudgment as a matter of law."), rev'd on other grounds, 1998 Del. LEXIS 115.
1984 Del. Super. LEXIS 806.
An objective of § 3902(b) is to give those who carry liability coverage in excess of the minimum statutory amount the full opportunity to carry uninsured (and now underinsured) coverage in an equal amount. The duty which is imposed by statute is the duty to offer such insurance so that the insured can make an informed decision. An informed decision can be made only if all of the facts reasonably necessary for a person to be adequately informed to make a rational, knowledgeable and meaningful determination have been supplied.
Id. at *3 — 4 (citations omitted).
"The prospect of overbearing is sufficiently great that section 3902(b) was enacted to require dissemination of important information which many consumers, other than the most diligent, might not discover." The statute's purpose is to ensure that responsible Delaware drivers — — i.e. drivers who maintain responsible limits of liability coverage — — can avail themselves of equal UM/UIM coverage in the event they encounter less responsible tortfeasors. To effect this purpose, Delaware courts have strictly enforced Section 3902(b)'s requirement that insurance carriers clearly communicate offers of additional UM/UIM coverage to their policyholders.
State Farm Mut. Auto. Ins. Co. v. Arms, 477 A.2d 1060, 1065 (Del. 1984).
See, e.g., Harding v. N.K.S. Distribs., Inc., 1991 Del. Super. LEXIS 395, at *4 (concluding that insurance company did not make meaningful offer when it merely provided the amounts of available coverage and the costs without more explanation); Walsh v. State Farm Mut. Auto. Ins. Co., 624 F. Supp. 1093, 1099 (D. Del. 1985) (finding that the following phrases were too confusing to constitute an offer: "possible offer," "this is not a statement of contract," and "please see your agent.").
The insurer has the affirmative duty to make the offer. This duty arises "when a new policy, other than a renewal is offered, and a new policy is issued when there is a material change in the policy." Changing vehicles included in the coverage of the policy is considered a "material change." If the offer language is challenged, the insurer bears the burden of demonstrating compliance with Section 3902(b). To carry this burden, the insurer must demonstrate that the offer included: "(1) the cost of the additional coverage; (2) a communication to the insured which clearly offers uninsured motorist coverage; and (3) an offer for uninsured motorist coverage made in the same manner and with the same emphasis as the insurer's other coverage." If the insurer cannot meet this burden, then Delaware courts treat the offer as a continuing offer for additional coverage, which the insured may accept even after the insured's accident. It is presumed that the policyholder would accept this offer. Thus, if no meaningful offer has been made, the Court must reform the policy to increase the policyholder's UM/UIM coverage to match his liability coverage limits.
Harding, 1991 Del. Super. LEXIS 395, at *3
Drenth, 1997 Del. Super. LEXIS 466, at *6.
Patillla v. Aetna Life Cas. Co., 1993 Del. Super. LEXIS 161, at *3.
Drenth, 1997 Del. Super. LEXIS 466, at *8.
Hudson v. Colonial Penn Ins. Co., 1993 Del. Super. LEXIS 241, at *7
Drenth, 1997 Del. Super. LEXIS 466, at *8.
Knapp v. United Servs. Auto. Assoc., 1997 Del. Super. LEXIS 384, at *8 ("[A]bsent compliance with § 3902(b), the offer remains open even if the insurer can show that the insured would have declined coverage."), rev'd on other grounds, 1998 Del. LEXIS 115; Eskridge v. Nat'l Gen. Ins. Co., 1997 Del. Super. LEXIS 53, at *16 ("[I]t is presumed that the insured would accept this offer.").
Eskridge, 1997 Del. Super. LEXIS 53, at *17 — 18 ("Although the insurer filed this motion for summary judgment, it agreed in its pretrial stipulation and at oral argument that if this Court finds the offer of um/uim coverage was invalid, then this Court must reform the insurance policy as a matter of law. Accordingly, I reform the policy to reflect an increase in underinsured coverage equal to the amount plaintiffs obtained for basic liability.").
C. USAA Has Failed to Communicate A Meaningful Offer for Additional UM/UIM Coverage
1. USAA Did Not Make a Meaningful Offer in May 1995 or October 1996As noted above, Mr. Shukitt's change of vehicles under his policy in 1995 and 1996 triggers Section 3902(b) and requires the Court to consider the adequacy of the offer language in the `95 and `96 packets. In this instance, however, the Court need not blaze a new trail as it reviews USAA's offers of coverage; the path was cleared quite recently when nearly identical offer language from USAA was reviewed by the Supreme Court of Delaware in Mason v. United Services Automobile Association ("Mason"), and again by this court in Knapp v. United Services Automobile Association ("Knapp"). In both instances, the courts concluded that USAA's offers were inadequate.
The Court has previously quoted the relevant offer language from the version of Form 999 (DE) in the `95 and `96 packets. See supra text accompanying note 2.
697 A.2d 388 (Del. 1997).
1997 Del. Super. LEXIS 384, rev'd on other grounds, 1998 Del. LEXIS 115.
Mason addressed a fifty-page packet containing Form 999 (DE) and Form 41 (DE). The court was critical of several aspects of the purported offer. First, the court criticized the location and emphasis of the offer, noting that the carrier "could have easily drafted text that would have permitted the policyholder to have readily located and recognized an offer of additional insurance coverage." Instead, the offer was "buried" on page 41 of a fifty-page packet. Second, the offer was not highlighted or in its own designated section. The carrier chose instead to disperse the relevant language "throughout eight pages of text." Finally, and "[m]ost importantly, the text [did] not clearly state that an offer of additional insurance [was] being made." The court considered these deficiencies in the context of the doctrine of contra proferendum: "[if] an insurance contract is ambiguous (as here) it must be construed against the insurance carrier that drafted it." The court concluded that USAA's offer did not satisfy Section 3902.
Forms 999 (DE) and 41 (DE) are the only forms brought to the Court's attention which purport to offer increased UM/UIM coverage. Other forms were also included in the fifty-page packet, but these forms were not addressed by the parties here, nor were they addressed in the other cases that have considered USAA's offers of coverage. As best as the Court can discern from the submissions, the only relevant documents are Form 41 (DE) and Form 999 (DE).
Mason, 697 A.2d at 394.
Id.
Id.
Id.
Id.
The Forms 999 (DE) sent to Mr. Shukitt in the `95 and `96 packets contain language very similar to the language considered in Mason and the exact language quoted in Knapp. Although the offer language in the forms sent to Mr. Shukitt was not as "buried" in the packets as the language at issue in Mason, Mr. Shukitt's Forms 999 (DE) fail the most important consideration recognized in Mason: they fail to contain a clear offer of additional coverage. In fact, Knapp focused on the same language that appeared in the `95 and `96 packets and, on the basis of the ambiguity of the offer language alone, without any reference to the location or emphasis of the offer, the court found that USAA's offer was not sufficient to meet the requirements of Section 3902. This Court will follow the well-reasoned decisions in Mason and Knapp. USAA's purported offers to Mr. Shukitt in the `95 and `96 packets are not "meaningful" and must be reformed.
There are only two differences in the text that the Court can discern from comparing the quoted portions of Form 999 (DE) in Mason to Form 999 (DE) in the 1995 and 1996 packets. Under "Determining the UM Limits You Need," USAA added to Mr. Shukitt's Form 999 (DE): "[a]n active duty officer may not need as much protection as a self-employed person." The second difference in this same section is that USAA added: "*Note: USAA Life Company now offers Income Replacement and Medical Expense programs inmost states. For information call 1-800-531-8000." The Court finds that these two sentences do not provide an adequate basis to distinguish Mason.
The policy renewals sent in November 1995 and November 1997 contain essentially the same inadequate "offer" language discussed above and rejected in Mason and Knapp.
2. The November 1999 Renewal Notice Did Not Cure Earlier Flawed Offers
After Mason, USAA revised its policy information packets to attempt to cure the deficiencies identified by the Supreme Court in Mason. Mr. Shukitt received the revised offer language in a policy renewal notice in or around November 1999. The question remains whether the timing of these revisions will allow USAA to avoid reformation.
Mason recognized that the timeliness of the offer is of the utmost importance in considering whether a meaningful offer has been communicated. The plaintiff in Mason made a material change in the circumstances of coverage over the phone, but there was no evidence that she received a packet offering the additional coverage at that time. Instead, USAA periodically mailed policy renewal packets every six months. According to Mason, an offer in a policy renewal, which arrives months after the material change to the policy, is not a timely offer. The court stated that USAA "failed to meet its burden to show that it had made a meaningful offer of additional uninsured motorist coverage at the time of [the plaintiff's] material policy changes." As discussed above, the Court has decided that USAA failed to demonstrate that a meaningful offer had been made at the time of Mr. Shukitt's material policy changes. An untimely offer made months or even years later in a policy renewal cannot cure the defective offer.
Mason went on to hold that the language in the policy was not sufficient to constitute an offer, but the court's first alternative holding was that USAA failed to make a timely offer. Mason, 697 A.2d at 394.
Id. (emphasis supplied).
The Court's conclusion here is in step with the policy considerations which animate Section 3902. When making decisions about their new policies, policyholders should have all relevant and necessary facts at hand to enable them to make a fully informed decision about coverage. This focus on the availability of information at the time of the material change is important to achieve the statute's goal of encouraging policyholders to make well-informed decisions about their coverage. Section 3902(b) is not satisfied when offer language is contained within policy renewals because the policy renewals are an automatic continuation of the previous policy; they do not offer the policyholder information to assist in determining whether to accept the coverage in the first instance. Thus, to be made in a timely manner, the offer must be communicated at or near the time a material change is made to the policy. USAA's offer of additional UIM coverage in a November 1999 policy renewal was not a timely offer.
Morris, 1984 Del. Super. LEXIS 806, at *3 — 4.
Arms, 477 A.2d at 1065.
Mason, 697 A.2d at 394.
Furthermore, even if the Court was to conclude that a meaningful offer of additional coverage could be included in a renewal notice, the placement of the revised Form 41 (DE) and Form 999 (DE) in the renewal packet sent to Mr. Shukitt in November 1999 was such that any offer contained therein could not be deemed meaningful. The November 1999 packet was twenty-five pages long; the first discussion of UM/UIM coverage appeared on page 18. The actual offer of UM/UIM coverage began on page 21. Just as in Mason, this "offer" again was "buried" in the information packet without any prominent indication in the early pages of the packet that an offer was being made. Although USAA made some changes to the language in Form 999 (DE) to indicate that an offer was being made and grouped much of the offer language together, the text is still buried in a mass of unrelated information. Because policy renewals are mere continuations of an existing policy, an offer of additional insurance would have to be more prominently displayed to attract a policyholder's attention. Only the most diligent policyholder could find this revised offer in USAA's November 1999 renewal packet. Thus, the Court finds that the November 1999 renewal packet did not cure USAA's earlier failures to make meaningful offers of additional UM/UIM coverage at the time material changes were made to the policy.
Interestingly, the title of Form 999 (DE), which USAA had renamed "Offer of Insurance Coverages" on the actual form, still appeared on the front page of the packet under its previous title, "Auto Insurance in Delaware." The title, "Auto Insurance in Delaware" certainly would not alert a policyholder that the packet contained an offer of additional insurance.
It is important to note that the Court here is considering only the placement of the text, and is not evaluating the sufficiency of the actual "offer" language by Mason's standard.
IV. CONCLUSION
USAA did not make a meaningful offer of additional UM/UIM coverage to Mr. Shukitt within the meaning of Section 3902(b). Because the offer remains open and Mr. Shukitt is presumed to accept this offer, the Court will reform his policy to reflect the increased UM/UIM coverage up to his liability coverage of $100,000 per person/$200,000 per accident. Accordingly, USAA's motion for summary judgment is DENIED, and Mr. Shukitt's cross motion for summary judgment is GRANTED.
Harding, 1991 Del. Super. LEXIS 395, at *8 ("Because Liberty Mutual breached its duty to offer additional UM coverage to plaintiffs, the option of taking such coverage remains open, entitling plaintiffs to reformation of their policy to include UM coverage in an amount equal to their basic liability coverage at the time of the accident.").
IT IS SO ORDERED.