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By: Erin Lamb
In Farmland Mutual Insurance v. Sechrist, the Third Circuit upheld a district court’s decision rejecting the claims of employees involved in a serious accident while driving a vehicle for Clouse Trucking that they were entitled to $1,000,000 in underinsured (UIM) benefits instead of the $35,000 paid to them by Farmland Mutual Insurance Co.
Farmland had determined that Clouse Trucking had selected to waive UIM coverage equal to the bodily injury liability coverage ($1,000,000), and selected UIM coverage of $35,000. The employees had argued that Clouse Trucking’s waiver was invalid and unenforceable as it was contrary to what is required by the Pennsylvania Motor Vehicle Financial Responsibility Law (PMVFL).
Farmland proceeded with a declaratory judgment action in the U.S. District Court for the Middle District of Pennsylvania, seeking determination of its obligations under that law, related to the UIM coverage. The district court granted summary judgment, adopting the argument that the policy application was a valid written request by Clouse Trucking for lower UIM coverage, as allowed under the (PMVFL). The employees appealed to the Third Circuit claiming the purported selection of the lowered UIM coverage was not a valid written request under the PMVFL. They argued that the requirements had not been met because the selection form contained a box that listed the UIM limit offered as $35,000 when it should have read $1,000,000.
Notably, in the application for the Farmland policy, the owner of Clouse Trucking checked a box that stated, “I want Underinsured Motor Coverage with limits lower than my bodily injury liability limits, as indicated below…” However, a sticky note obscured several of the boxes that were options for the amounts he could select. There was a handwritten note that stated near the selection, “35,000”. The Important Policyholder Notice, signed by Clouse, indicated that he understood that Farmland provided such coverage up to at least $100,000.
The Third Circuit found that, while the PMVFL required specific written waivers with statutorily-provided forms if an insured declined uninsured or UIM benefits entirely, that was not the case for simply selecting an amount less than the bodily liability coverage. In such a case, the election could take any form, so long as the request was signed by the insured, and contained a designation of the amount of coverage selected. Those requirements were met. The court found no significance in the fact that the Underinsured Motorist Coverage Limit Offered portion of the Selection form had stated that amount as $35,000 when it should have read $1,000,000.
If you have any questions or would like more information, please contact Erin Lamb at [email protected].