Opinion ID: 2509465
Heading Depth: 1
Heading Rank: 1

Heading: Uninsured and Underinsured Motorist Bodily Injury Coverage

Text: Coverage Limit Premium Premium Per Person/Per Accident 1st Vehicle 2nd Vehicle ( ) $50,000/$100,000 $31.20 $24.90 ( ) $100,000/$200,000 $40.20 $32.20 ( ) $100,000/$300,000 $44.90 $35.90 ( ) $300,000/$300,000 $55.80 $44.60 ( ) $250,000/$500,000 $58.30 $46.60 ( ) $300,000/$500,000 $59.20 $47.40 ( ) $500,000/$500,000 $64.20 $51.30 ( ) $500,000/$750,000 $67.60 $54.10 ( ) $500,000/$1 MIL $72.30 $57.80 ( ) $1MIL/$1MIL $83.80 $67.00 ( ) $1MIL/$2MIL $91.70 $75.70 [] I do not want Uninsured and Underinsured Motorist Bodily Injury coverage for my vehicles. Rejection of this coverage must be in writing. (Footnote omitted.)
Kenneth Bozinoff purchased automobile insurance from State Farm Mutual Automobile Insurance Company (State Farm) in August 1997. State Farm presented him with a UIM application form similar to that used by GEICO. The form listed the six optional levels of coverage required by AS 21.89.020(c). The form did not list the premium for each level of coverage. Kenneth Bozinoff checked the box opposite coverage limits of $100,000/$300,000. Shortly before February 11, 1998, State Farm sent renewal forms to Kenneth Bozinoff. The renewal forms contained an insert that included a chart indicating the premiums for the various levels of UIM coverage. According to Kenneth Bozinoff, he did not receive the renewal information because it was sent to his tax adviser's address. Kenneth Bozinoff renewed his policy on February 11, 1998, for the same levels of coverage that he had purchased previously, $100,000/$300,000. On June 13, 1998, Kenneth Bozinoff's daughter, Maurita Bozinoff (Bozinoff), was involved in a serious automobile accident in which the other driver, an underinsured motorist, was negligent. Bozinoff brought suit in superior court against State Farm for the maximum amount of UIM coverage mandated under AS 21.89.020(c), less what she had already received from the negligent driver.
In Graham-Gonzalez v. GEICO, both parties moved for partial summary judgment on the issue of whether GEICO's procedures complied with AS 21.89.020(c). GEICO argued that the word offer in the statute meant notify as to availability. Graham-Gonzalez argued that offer as used in the statute was a term of art and should be understood to mean what the word means when contract formation is described. She relied on Spenard Plumbing & Heating Co. v. Wright , in which we stated: Professor Corbin defines an offer as an expression by one party of his assent to certain definite terms, provided that the other party involved in the bargaining transaction will likewise express his assent to the identically same terms. The making of the offer, he points out, creates a power of acceptance in the offeree, and once the offer has been made there is nothing left for the offeror to do but to wait for the offeree to close the contract.[ [1] ] Using this approach Graham-Gonzalez argued that offer required communication of the price for each of the levels of coverage. The superior court held that insurers are required to include the cost of coverage at each level in the initial application forms because the offer must be presented in a manner reasonably calculated to permit the customer to make an informed decision of whether to purchase UIM coverage at the mandated levels.... The court ruled that the remedy for GEICO's noncompliance with the offer requirement was that the policyholder (Judith Martin) would have the opportunity to choose any level of mandated coverage and that the coverage so chosen would apply retroactively to the accident. We granted GEICO's petition for review from these rulings. [2] In Bozinoff v. State Farm, State Farm moved for summary judgment, seeking a declaration that it had complied with AS 21.89.020(c). Bozinoff opposed the motion. The superior court denied State Farm's motion for summary judgment, concluding that the initial application forms presented to Kenneth Bozinoff in August of 1997 did not comply with the statute. The court also ruled that the renewal forms that State Farm sent to Kenneth Bozinoff in 1998 did comply with the statute but that there was a question of fact as to whether Kenneth Bozinoff received these forms prior to the accident. State Farm petitioned for review from these rulings. We granted its petition and consolidated its case with that of GEICO.
The dispute in these cases centers on the meaning of the requirement in AS 21.89.020(c) that an insurance company shall ... offer UIM coverage at various specified limits as part of an automobile liability insurance policy. We set out the full text of AS 21.89.020(c), and (e)  because it bears on the meaning of (c)  in the margin. [3] The insurers argue that the statutory offer requirement has two components: (1) insurers must make the mandated coverage available; and (2) they must notify their prospective customers of its availability. The insureds argue that the statute also requires insurers to provide price information in their initial application forms. The question before the court is one of statutory interpretation. We have summarized the approach we take on questions of statutory interpretation as follows: In construing the meaning of a statute, we look to the meaning of the language, the legislative history, and the purpose of the statute in question. The goal of statutory construction is to give effect to the legislature's intent, with due regard for the meaning the statutory language conveys to others. Because this is a case of first impression in this state, `[o]ur duty is to adopt the rule of law that is most persuasive in light of precedent, reason, and policy.' .... We have rejected a mechanical application of the plain meaning rule in matters of statutory interpretation, and have adopted a sliding scale approach instead. The plainer the statutory language is, the more convincing the evidence of contrary legislative purpose or intent must be. In assessing statutory language, unless words have acquired a peculiar meaning, by virtue of statutory definition or judicial construction, they are to be construed in accordance with their common usage. [ [4] ] In our view the shall offer language of AS 21.89.020(c) requires that each insurer must make available to its prospective customers the mandated levels of UIM coverage. This means that insurers must notify prospective customers that they will sell such coverage. And since coverage would not truly be made available if an insurer refused to quote a price for it, the statute requires at least that prices be furnished upon request. But does the statute require that the initial form notifying customers of the availability of coverage include the price for each level? We conclude that it does not for the reasons that follow. Alaska Statute 21.89.020(c) does not prescribe how insurers should notify their prospective customers of available coverage or direct any particular form for such notice. In Peter v. Schumacher Enterprises, Inc., we held that offers required to be made under .020(c) did not have to be in writing: Alaska Statute 21.89.020(c) clearly requires that policy purchasers be offered the sets of optional limits described in subsection.020(c)(2). But Peter contends that such offers must be in writing. Finding no textual basis for this argument, we reject it. But there is an unresolved factual question as to whether the availability of the optional limits prescribed by subsection.020(c) was communicated in any form to [the insured].[ [5] ] Since the methods by which coverage is to be offered are not dictated by the statute  not even to the extent that offers must be in writing  it follows that the statute does not require that insurers quote premium prices when they first mention that multiple levels of coverage are available. Here, as in Peter, there is no textual basis for the argument that the statute imposes the particular formal requirement that the price be stated at the outset of the process leading to the sale. The meaning of the verb offer in common usage in the context of the sale of a product is to make available or accessible. [6] The general to make available usage was illustrated in Peter. With reference to the requirements of subsection .020(c), we noted that there were fact questions as to whether the availability of the optional limits ... was communicated in any form.... [7] This usage does not connote that the price of the item made available for sale must necessarily be stated in the initial communication of the availability of the item. The media are replete with advertisements announcing the availability of goods and services that do not state prices. Subsection (e) of .020 also indicates that offer in subsection (c) was meant to describe a process of making coverage available and giving notice of availability. The second sentence of (e) exempts insurers from the offer requirement of (c) on policy renewals once the insured has either waived UIM coverage altogether or selected a level of coverage. In the process it describes what (c) requires. The second sentence provides in relevant part: After selection of the limits by the insured or the exercise of the option to waive the coverage ... the insurer is not required to notify any policyholder in any renewal ... policy, as to the availability of the coverage or optional limits.... (Emphasis added.) It follows from this language that before limits are selected or waived the insurer is required to notify customers as to the availability of the coverage and optional limits. Thus it seems that in (e) the legislature described the acts that it contemplated insurers must fulfill under (c), when the exempting conditions of (e) are not present. The legislative history of AS 21.89.020(c) also indicates that the legislature contemplated that offer would mean make available and give notice of availability. Subsections (c) and (e) were enacted in 1984. Subsection (e) has remained unchanged. But subsection (c) originally only required that insurers shall offer [UIM coverage] with limits equal [to the liability limits selected by the insured]. This was changed in 1990 when the requirement that at least six levels of UIM coverage be offered was added. According to the minutes of the House Labor and Commerce Committee, this was done to ensure that members of the public would have the option to purchase at least one million dollars coverage of underinsured and uninsured motorist coverage. [8] During a committee meeting considering this amendment, an insurance company lobbyist suggested amending the shall offer language in . 020(c) to shall make available in order to alleviate vagueness as to when to make the offer. [9] Representative Donley, the prime sponsor of the bill, rejected this suggested change. According to the minutes: Chairman Donley told Mr. Frank that regarding his recommendation to change shall offer to shall make available, the wording shall offer compels the insurer to offer the insurance to the insured whereas if the insurer only has to make it available it may not get mentioned. Rep. Gruenberg concurred. [ [10] ] Thus Representative Donley recognized that the offer requirement had two components: the coverage had to be made available and it had to be mentioned. This is what subsection (e) implies that the offer requirement in subsection (c) means. To change offer in (c) to make available would potentially eliminate the notice component described in (e). This history therefore supports the view that the legislature intended that the offer language of subsection (c) would mean what subsection (e) implies that it means. Insurers must not only make each level of mandated coverage available, they must also notify insureds as to the availability of each level of coverage. But absent from the legislative history is any suggestion that the legislature intended that the premium for each optional level of coverage would have to be quoted as part of the offer. Although AS 21.89.020(c) does not purport to regulate the forms insurers may use in soliciting coverage, such forms are subject to state regulation. Alaska Statute 21.42.120(a) requires that application forms that are to become part of a policy must be filed with and approved by the director of the Division of Insurance. Alaska Statute 21.42.130(1) requires that the director disapprove a form that is filed that is in any respect in violation of or does not comply with [Title 21 of the Alaska Statutes]. At the request of GEICO we have taken judicial notice that the Division of Insurance has approved application forms submitted by insurers and by agencies serving insurers that, like the applications at issue in this case, list the various levels of coverage required but do not state the premium that will be charged for each level of coverage. [11] The parties differ as to the weight that this court should give to the division's approvals. GEICO argues that we should give substantial deference to the approvals since the legislature has delegated to the division the duty of enforcing and administering the statutes concerning insurance. Graham-Gonzalez, on the other hand, argues that the approvals have no legal effect and that the court must exercise its independent judgment to decide what AS 21.89.020(c) requires. Typically we use the independent judgment standard on questions of law unless the issue involves agency expertise or the determination of fundamental policy questions on subjects committed to the agency. [12] This court has not ruled on whether Division of Insurance approvals of forms under AS 21.42.120 and .130 should be reviewed deferentially under the reasonable basis standard or whether the court should substitute its judgment for that of the division on the question whether forms comply with the applicable statute. At least one other jurisdiction has suggested that the more deferential standard is appropriate. [13] If we were to adopt the more deferential standard, the question presented in this case would be readily resolved in favor of the insurers, for it is plainly reasonable to interpret the statute as not requiring that initial application forms contain premium information. But even if the independent judgment standard were applied, the division's approval of forms like those used in the present case would be entitled to some deference. In such cases this court gives some weight to what the agency has done, especially where the agency interpretation is longstanding. [14] In the present case it is unnecessary to determine which standard of review should be applied because even if only some weight is given to the approvals they are consistent with this court's view as to what .020(c) requires. The purpose of .020(c) is to give insureds various options with respect to UIM coverage: to select coverage with limits mirroring their liability limits, or with different limits, or to waive coverage altogether. This purpose is not frustrated by interpreting the subsection as not requiring premium quotes to be included in application forms. Insureds can be expected to ask for the prices of coverage they are interested in. Application forms would be more informative if they contained premium information, and this is a factor that favors the respondents' position in these cases. But it is the only factor. It is outweighed, in our judgment, by the reasons pointing to the opposite conclusion outlined above. To summarize, these are (1) that .020(c) does not impose formal requirements as to the content of application forms and, as we have previously held, does not require that the notification of levels of coverage be in writing; (2) the common, nontechnical, meaning of the word offer in a sales context is, in short, to make available, a definition that does not require that the price of the item to be sold be communicated in the initial solicitation; (3) subsection .020(e) describes what is meant by the offer requirement in subsection (c) consistent with the common meaning  coverage must be made available and notice of its availability must be given; (4) the legislative history indicates that the intended meaning of offer is the meaning reflected in subsection (e) requiring both availability and notice of availability of required levels of coverage; and (5) the Division of Insurance in the exercise of its delegated authority to regulate insurance company forms has with apparent consistency approved of forms that do not set out the premiums for the mandated levels of UIM coverage. For these reasons we conclude that AS 21.89.020(c) does not require that application forms state the premiums that would be charged for each level of UIM coverage mandated by that subsection. [15] We thus REVERSE the decisions of the superior court in these cases and REMAND for further proceedings consistent with this opinion.