Who Can Reject Uninsured Motorist and Personal Injury Protection Coverage?

Insured individuals are granted statutory options to reject uninsured motorist (UM) or personal injury protection (PIP) coverage in a majority of states. There have been a number of issues that the courts have addressed with respect to the rejection of UM/PIP coverage such as whether the rejection must be in writing or can be oral, whether a rejection applies to renewal policies, and whether there can be a partial rejection by contracting for coverage in less than the statutorily required amounts.

Several courts have addressed the issue of who has statutory right to reject UM coverage and to which insured persons does the rejection apply. The majority of statutes mandating UM/PIP coverage typically specify that the "named insured" and "any insured named in the policy" has the right to reject the coverage. These terms are usually not defined in the statutes. The term "insured" is typically defined in the policy itself to include not only the insured named on the automobile policy, but also certain others having a designated relationship with that person.

Recently, the Texas Supreme Court held that the statutory terms "named insured" and "any insured named in the policy" are indistinguishable. Old American County Mut. Fire Ins. Co. v. Sanchez, 149 S.W.3d 111, 117 (Tex. 2004), citing Whitten v. Progressive Cas. Ins. Co., 410 So. 2d 501, 503 (Fla. 1982), (rejection of coverage by father, who was named insured on the policy, was binding on son, who was principal operator, as well as on any additional insureds named on the policy); Miller v. State Farm Mut. Auto Ins. Co., 155 Ga. App. 487, 271 S.E.2d 14, 15 (1980); Oncale v. Aetna Cas. & Sur. Co., 417 So. 2d 471, 474 (La. App. 1982, cited with approval inBullock v. Homestead Ins. Co., 697 So. 2d 712, 715 (La. App. 1997).

Having determined that the phrase "named insured" is synonymous with "insured named in the policy, the Texas Supreme Court in Old Am. Cty. Mut. Fire Ins. Co. v. Sanchez, supra, held that the wife of the named insured was qualified statutorily to reject the UM and PIP coverages. Because the statutory category of persons entitled to reject such coverage included "any insured named in the policy," the court looked to the standard automobile insurance policy form in use when the Legislature enacted articles 5.06-1 (UM statute) and 5.06-3 (PIP statute) of the Texas Insurance Code. The court found that the Texas Family Automobile Policy form was applicable at that time and defined "named insured" to include both the individual named on the declarations page of the policy "and … [that individual's] spouse, if a resident of the same household." Id. at 118. Thus, the court concluded that when the Legislature used the phrase "named insured," the Legislature understood that phrase to include the named insured's resident spouse, even if he or she was not specifically identified on the declarations page of the policy. Id.

Other courts have interpreted the UM statutes broadly to recognize sufficient rejection by any person that qualifies as a "named insured" and that the rejection by one applies to all insureds. See St. Paul Mercury Inc. Co. v. MacDonald, 509 So. 2d 1139 (Fla. App. 1987) (named insured's wife effectively rejected increased limits of UM coverage and such rejection was binding on named insured husband); Farrior v. State Farm Mut. Auto. Ins. Co., 595 S.E.2d 790 (N.C. App. 2004) (rejection of UM coverage by named insured was binding on all insureds under policy); Hall v. Allstate Ins. Co., 53 Wash. App. 865, 770 P.2d 1082 (1989) (husband who purchased automobile policy had right to waive UM coverage on behalf of both himself and his wife, both of whom were designated as named insureds on the policy).

On the other hand, the Alabama Supreme Court has interpreted its statute, which limits the right of rejection to the "named insured," to apply only to the person actually named on the policy and not the wife/spouse of the named insured. See State Farm Mut. Auto. Ins. Co. v. Martin, 292 Ala. 103, 289 So. 2d 606 (1974) (commissioner of insurance issued directive requiring that rejection be in writing and signed by named insured). In fact, the Alabama courts have interpreted their UM statute so strictly that rejection of UM coverage by one named insured is not effective as a rejection by other named insureds on the same policy. Nationwide Ins. Co. v. Nicholas, 868 So. 2d 457 (Ala. App. 2003).

Other courts have taken this same literal approach to interpretation of the UM statute, limiting the validity of the rejection to the named insured. See Nationwide Mut. Ins. Co. v. Pasion, 219 Conn. 764, 594 A.2d 468 (1991) (under statute required written waiver signed by "insured" in order to reduce UM coverage below level of liability coverage, term "insured" referred to all named insured on policy so that written request to reduce coverage was required to be signed by all insureds to effectuate reduction); State Farm Fire & Cas. Co. v. Garrett, 783 N.E.2d 329 (Ind. App. 2003) (personal liability umbrella policy did not create agency relationship between named insured who rejected UM coverage and other named insured, who did not personally execute rejection, and thus named insured's rejection did not serve as rejection of UM coverage on behalf of other named insured, where policy did not contain provision stating that named insured was authorized to act for each additional named insured); Plaster v. State Farm Mut. Auto. Ins. Co., 791 P.2d 813 (Okla. 1989) (when policy of insurance with more than one individual as "named insured," written rejection of UM coverage executed by one named insured was ineffective rejection of said coverage on behalf of all named insureds).

To be sure, practitioners should secure a rejection of UM/PIP coverage by every insured named on the policy, unless it is clear in the subject jurisdiction, like Texas, that anyone that qualifies as a insured named on the policy has the authority to reject UM/PIP coverage.