Opinion ID: 2461615
Heading Depth: 1
Heading Rank: 6

Heading: a policy is new under the uim statute when a new contractual relationship arises on or after january 1, 2001, or material changes to the terms of an existing insurance contract alter the risk relationship between the insurer and the insured

Text: ¶ 15 Although the plain language of the UIM Statute signals that the Legislature intended to treat new policies differently than those already in existence, the statute contains no definition of new policy, nor does it contain any guidance for courts seeking to attach meaning to this term. And from the plain language of the statute, the meaning of new policy is far from apparent. Read narrowly, new policy could be limited to only new contractual relationships and would limit the obligation of insurers to obtain waivers from only new customers entering insurance contracts for the first time. Just as reasonable, however, is a broader definition of new policy. Under this interpretation, an insured could possess a new policy if the terms of a policy existing on or after January 1, 2001, change in such a material way that the relationship of risk between the insurer and insured has little resemblance to the original policy. [8] Because the term new policy is ambiguous, we turn to other interpretive tools to assign meaning to this term. [9] In doing so, we conclude that the legislative history and policy considerations underlying the UIM Statute support a broader definition of new policy that includes not only new contractual relationships but also material changes to an existing policy that alter the risk relationship between the insurer and the insured. ¶ 16 In General Security Indemnity Company of Arizona v. Tipton, [10] the Utah Court of Appeals examined the UIM Statute's legislative history, which reveals that the statute was passed in response to an urgent concern that citizens of the state did not understand the consequences of not carrying uninsured or underinsured motorist coverage. [11] Specifically, the court of appeals quoted from the floor debates of the Utah House of Representatives: When we buy insurance for our cars, and we purchase the amount that we can refer to as the liability amount, ... consumers generally don't understand that that's a package that you buy, and they believe that when they're buying that coverage, that's taking care of themselves or their family. That's not the case. ... What this bill does is [sic] says, when you're purchasing insurance ... the underinsured coverage will be the same as the liability coverage you have, unless you choose not to take that. But what [the bill] presumes, is that the levels will be the same, so that the consumer gets what they believe they're buying, or they understand what they're buying, and ... it provides a way that if you don't want that, then you can sign a waiver saying I recognize I'm taking a lesser amount of underinsured coverage. So, it is not mandating any coverage onto a consumer, but it is affirmatively informing them, and showing that ... they're taking less coverage. [12] ¶ 17 These legislative statements reveal that this statute was designed to affirmatively inform consumers about UM/UIM coverage by allowing them to sign a waiver saying, I recognize I am taking a lesser amount of underinsured coverage. [13] This suggests that the statute's scope is broad and requires that current insurance owners are presented with the information they need to make an informed decision about UM/UIM coverage. If new policy is read narrowly, few current insurance policyholders will have the opportunity to sign a waiver. Indeed, the opportunity to sign a waiver would arise only if a current insurance policyholder's contract lapses or if the insured switches insurance providers; the majority of policyholders will not fall into these categories. ¶ 18 A broader definition of new policy is also supported by the changing nature of insurance policies over time in response to life circumstances. For instance, consider a single driver in his late twenties paying a $75 premium each month with a $100,000 liability limit. If new policy is read narrowly, then this driver would have the same policy under the statute even if he marries, years pass, he insures his three teenage children, and he pays $300 premiums with a $250,000 liability limit. While most individuals would consider the second policy to be a different policy than the first, a narrow interpretation of new policy would treat them as the same policy under the statute, and the driver would receive a description of UM/UIM coverage only with his renewal notice despite the passage of time and the significant changes to the original policy. This form of communication does not give drivers the same chance to affirmatively consider obtaining UM/UIM coverage as would be available through the waiver process. We do not believe that the Legislature intended the definition of new policy to be this narrow. ¶ 19 Finally, a broader definition of new policy is supported by public policy. As a society, we depend on insurance. At its core, insurance is a product designed to manage risk. We have an interest in protecting people who endeavor to use the insurance system to manage this risk. We want them to make informed decisions. And when life presents new risk to the insured, we conclude that the Legislature has formulated a rule that allows the insured to reconsider her insurance situation in a direct and meaningful way. We believe that the Legislature intended the term new policy under the statute to be broad enough to achieve its stated educational goals and to be interpreted in a way that allows the maximum number of insureds to read and sign a document that emphasizes the potentially catastrophic consequences associated with choosing not to purchase UM/UIM coverage. ¶ 20 For the foregoing reasons, we conclude that an individual has a new policy under the statute if she enters a new contractual relationship with an insurer, or if there is a material change in her existing policy. We believe that this approach most effectively achieves the increased education and informed decision making the Legislature intended. It allows people to reconsider their insurance coverage in response to life changes that may alter how much risk they are willing to bear.