Opinion ID: 1288711
Heading Depth: 1
Heading Rank: 8

Heading: applicability of wannamaker analysis in sale of fronting policy

Text: Plaintiff argues the determination of whether an insurer has made a meaningful offer of UIM coverage is an objective inquiry based on the language and form of the offer. It is neither necessary nor proper to consider the insured's subjective state of mind or wishes. Old Republic asserts that, because Penske is a knowledgeable, sophisticated insured which repeatedly rejected UIM coverage, it should not have to comply with the requirements of State Farm Mutual Auto. Insurance Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555 (1987), and its progeny. Old Republic also asks we find a meaningful offer was made in this case. We recently set forth the basic principles of law regarding meaningful offers in Progressive Cas. Ins. Co. v. Leachman, 362 S.C. 344, 608 S.E.2d 569 (2005): The insurer bears the burden of establishing it made a meaningful offer. Butler v. Unisun Ins. Co., 323 S.C. 402, 405, 475 S.E.2d 758, 759 (1996). A noncomplying offer has the legal effect of no offer at all. Hanover Ins. Co. v. Horace Mann Ins. Co., 301 S.C. 55, 57, 389 S.E.2d 657, 659 (1990). If the insurer fails to comply with its statutory duty to make a meaningful offer to the insured, the policy will be reformed, by operation of law, to include UIM coverage up to the limits of liability insurance carried by the insured. Butler, 323 S.C. at 405, 475 S.E.2d at 760. In general, for an insurer to make a meaningful offer of UIM coverage, (1) the insurers notification process must be commercially reasonable, whether oral or in writing; (2) the insurer must specify the limits of optional coverage and not merely offer additional coverage in general terms; (3) the insurer must intelligibly advise the insured of the nature of the optional coverage; and (4) the insured must be told that optional coverages are available for an additional premium. State Farm Mut. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 521, 354 S.E.2d 555, 556 (1987). In response to Wannamaker, the legislature enacted a statute establishing the requirements for forms used in making offers of optional insurance coverage such as UIM. The statute directs the insurer to include the following in its offer: (1) a brief, concise explanation of the coverage; (2) a list of available limits and the range of premiums for the limits; (3) space for the insured to mark whether the insured chooses to accept or reject the coverage, and a space to select the limits of coverage desired; (4) a space for the insured to sign the form, acknowledging that the optional coverage has been offered; and (5) the mailing address and telephone number of the Department, so that the insured may contact it with any questions that the insurance agent is unable to answer. S.C.Code Ann. 38-77-350(A) (2002). An insurer enjoys a presumption it made a meaningful offer if it executes a form that complies with this statute. S.C.Code Ann. 38-77-350(B) (2002); Antley v. Nobel Ins. Co., 350 S.C. 621, 632, 567 S.E.2d 872, 878 (Ct.App.2002). If the form does not comply with the statute, the insurer may not benefit from the protections of the statute. Osborne v. Allstate Ins. Co., 319 S.C. 479, 486, 462 S.E.2d 291, 295 (Ct.App.1995). Furthermore, a form does not necessarily constitute a meaningful offer simply because it was approved by the Department of Insurance. Butler, 323 S.C. at 408-409, 475 S.E.2d at 761. Progressive Cas. Ins. Co., 362 S.C. at 348-50, 608 S.E.2d at 571-72. We answer Question 4 yes, an automobile insurer selling a fronting policy to a commercial insured is required to comply with Wannamaker and its progeny in order to make a meaningful offer of UIM coverage even though the insured has expressed a desire not to purchase such coverage. Automobile insurers offering commercial policies, including fronting policies, are not exempt from the meaningful offer requirement contained in Section 38-77-160 because the Legislature has recognized that commercial insureds, like non-commercial insureds, undoubtedly run the gamut from the ill-informed to knowledgeable purchasers. Whether a meaningful offer was made depends on the facts and circumstances of a particular case, and the inquiry in this instance must be resolved in the federal proceeding. The impact of the insureds knowledge or level of sophistication regarding insurance matters on the determination of whether a meaningful offer was made cannot be decided on the limited record and arguments presented to us. Instead, such a decision is more appropriately resolved by a factfinder which has an opportunity to consider the entire factual record and the parties arguments. Evidence of an insureds knowledge or level of sophistication is not relevant when the analysis is confined to whether a particular written form complies with the statutory requirements, such that the insurer enjoys a presumption that it made a meaningful offer. That analysis simply involves a review of the written form itself. However, evidence of the insureds knowledge or level of sophistication is relevant and admissible when analyzing, under Wannamaker, whether an insurer intelligibly advised the insured of the nature of the optional UM or UIM coverage. It is a subjective inquiry to the extent the insured may offer evidence of his understanding, or lack thereof, of the nature of UM or UIM coverage. It also is an objective inquiry because the factfinder should consider the insureds knowledge and level of sophistication in determining whether the insurer intelligibly explained such coverage to the insured. See McDowell v. Travelers Prop. & Cas. Co., 357 S.C. 118, 123-25, 590 S.E.2d 514, 516-17 (Ct.App.2003) (affirming grant of summary judgment to insurer on issue of whether a meaningful offer was made under Wannamaker when evidence revealed commercial insured's professional risk manager was experienced in dealing with vehicle insurance coverage, was fully aware of nature and purpose of UIM coverage, and knew and was able to apply the mathematical formula for calculating UIM premiums under the policy); Anders v. S.C. Farm Bureau Mut. Ins. Co., 307 S.C. 371, 375-76, 415 S.E.2d 406, 408-09 (Ct.App.1992) (sophistication of insured ordinarily is an issue of fact which may be considered by jury in determining whether meaningful offer was made, and [o]ne who is ignorant and unwary might require more explanation than a sophisticated applicant). Whether the analysis is focused primarily on the written form, the Wannamaker analysis, or both, the purpose of requiring automobile insurers to make a meaningful offer of additional UM or UIM coverage is for insureds to know their options and to make an informed decision as to which amount of coverage will best suit their needs. Progressive Cas. Ins. Co., 362 S.C. at 352, 608 S.E.2d at 573.