Opinion ID: 2207558
Heading Depth: 1
Heading Rank: 3

Heading: uninsured/underinsured motorist coverage selection/rejection

Text: [ ] I choose to REJECT higher limits and coverage is requested for the minimum required to meet the Financial Responsibility Laws of the state. This form also contains a brief description of uninsured-motorist coverage and advises applicants of their right to reject it. Further, the form provides a check box to indicate the applicant's choice. A date line and a signature line appear immediately below the check box. That form, together with the Non-Fleet Transportation Application Form, was submitted to the Department of Insurance with the appropriate fee, and accepted for filing. By law, the Director of Insurance must require the filing of all policy forms and may require the filing of any generally used riders, endorsements, application blanks and other matter incorporated by reference in any such policy or contract of insurance. 215 ILCS 5/143(2) (West 1992). The same statute provides that if the Director shall find from an examination of any such policy form, rider, endorsement, certificate, application blank, or other matter incorporated by reference in any such policy so filed that it violates any provision of this Code, contains inconsistent, ambiguous, or misleading clauses, or contains exceptions and conditions that will unreasonably or deceptively affect the risks that are purported to be assumed by the policy, he shall order the company or companies issuing such forms to discontinue the use of the same. 215 ILCS 5/143(2) (West 1992). Deere argues that because the Department allowed the filing of the selection/rejection form, it necessarily made a determination that the form does not violate the Insurance Code, contain inconsistent, ambiguous or misleading clauses, or contain exceptions and conditions that will unreasonably and deceptively alter the risks assumed under the policy. Since the separate application and selection/rejection forms were both filed, Deere argues, the Director has implicitly authorized the use of a rejection form that is not physically contained within the application. Lee counters that, since there is no indication in the record that the Director of Insurance required the filing of either the application or the selection/rejection form, and since the Director did nothing more than affix the Department file stamp to the documents, no inference of Department approval arises. It is true, as Deere argues, that the approval of the Director is entitled to great weight, although it is not conclusive on the courts. Kirk v. Financial Security Life Insurance Co., 75 Ill.2d 367, 376, 27 Ill.Dec. 332, 389 N.E.2d 144 (1978). However, we cannot decide this issue on the basis of the Director's approval even if it was given. The application form and the selection/rejection forms are separate documents. The record conclusively establishes that the application form was submitted to Deere's agent without a completed selection/rejection form. The latter form was not executed by the insured until after issuance of the actual policy of insurance, replacing the temporary binder. Thus, we must determine whether this two-step process operates to defeat the rejection of coverage in this case. The selection/rejection form contains the requisite explanation of uninsured-motorist coverage, a space for rejection of the coverage, and a signature line. If this content appeared in the application form, it would be sufficient to accomplish a rejection of the coverage. Arguably, it could be sufficient if both forms were submitted simultaneously to the applicant, or if the selection/rejection form were separately submitted and signed prior to the issuance of the insurance policy. That, however, did not happen in the case before us. Deere argues that the procedure used to complete the application process was commercially reasonable and consistent with prior Illinois precedent. Since coverage was initially secured through issuance of a temporary binder and since execution of the selection/rejection form was requested when the binder was issued, Deere argues that submission of that form was part of the application process. This court has recognized that an insurance binder is in the nature of temporary insurance, that such a contract can be oral and that it will be presumed that the parties contemplate that a policy will be issued containing such conditions and limitations as are usual in such cases, or that have been used before between the parties. Zannini v. Reliance Insurance Co. of Illinois, Inc., 147 Ill.2d 437, 454-55, 168 Ill.Dec. 820, 590 N.E.2d 457 (1992), quoting Devers v. Prudential Property & Casualty Insurance Co., 86 Ill.App.3d 542, 544, 42 Ill.Dec. 84, 408 N.E.2d 462 (1980), quoting Cottingham v. National Mutual Church Insurance Co., 290 Ill. 26, 33, 124 N.E. 822 (1919). In Anderson v. Vrahnos, 149 Ill.App.3d 251, 102 Ill.Dec. 488, 500 N.E.2d 110 (1986), the appellate court held that the legislature did not intend that binders should be considered policies for purposes of the offer of underinsured-motorist coverage required by the version of section 143a-2 of the Insurance Code in effect at that time. Hence, a binder authorized by the insurance company did not, as a matter of law, include underinsured-motorist coverage. The same rationale, Deere contends, applies to the current version of the statute and the effect of the binder issued by Deere. The statute does not require execution of the rejection form prior to issuance of a binder. Since Elite, on behalf of Asia, requested minimum limits of uninsured/underinsured-motorist coverage, that coverage was properly bound and higher limits were not imposed by operation of law. While the binder was in effect and pending completion of the application process, the company requested execution of the selection/rejection form. The company ran the risk of increased uninsured/underinsured-motorist exposure after issuing the policy and prior to receiving the executed selection/rejection form. Because the statute does not expressly require the form to be executed prior to the binder or before issuance of the actual policy, Deere contends that rejection of the coverage was effective when the form was executed by Lin. Deere argues also that since the executed form was returned before the accident occurred, the additional underinsured-motorist coverage was not then in effect. A similar argument was rejected by the appellate court in Wood v. National Liability & Fire Insurance Co., 324 Ill.App.3d 583, 258 Ill.Dec. 225, 755 N.E.2d 1044 (2001). That court affirmed summary judgment directing reformation of an insurance contract to provide uninsured/underinsured-motorist coverage equal to the bodily injury limits where a separate form rejecting the additional coverage was submitted after issuance of the policy. The initial application form did not contain a provision for the rejection of the additional coverage. Thus, the additional coverage was contained in the policy at the time it was issued. Wood, 324 Ill.App.3d at 586-87, 258 Ill.Dec. 225, 755 N.E.2d 1044. The court reasoned: [I]t is clear that the legislature intended the application process to cease once an insurance policy is issued. In 1990, the legislature modified section 143a-2 so that the word `applicant' replaced the word `insured.' [Citation.] Before the change, the `insured' had the right to elect or reject [uninsured-motorist] coverage. In its present form, the statute `leaves no room for doubt as to whom [uninsured-motorist] coverage must be explained.' [Citation.] We believe that the revision makes it clear that the applicant, not the insured, be provided with a description of the [uninsured-motorist] coverage and that the applicant be given an opportunity to reject the coverage. The alteration is significant because it is the applicant who needs to know the extent and amount of his or her coverage before he or she agrees to enter into a contract of insurance. On the date the election form was signed, Wood was no longer an applicant because he had been issued a policy. Therefore, the election form could not serve as a valid rejection of the [uninsured/underinsured-motorist] coverage. (Emphasis in original.) Wood, 324 Ill. App.3d at 587, 258 Ill.Dec. 225, 755 N.E.2d 1044. The court further noted that once the policy was issued, the application process was complete. Thus, the company's argument that the application process was ongoing was unavailing. Wood, 324 Ill. App.3d at 587, 258 Ill.Dec. 225, 755 N.E.2d 1044. The Wood rationale was examined in Isaacson v. Country Mutual Insurance Co., 328 Ill.App.3d 982, 263 Ill.Dec. 136, 767 N.E.2d 862 (2002), where the court held that a coverage rejection executed after issuance of the policy was effective when the policy originally provided uninsured-motorist coverage equal to the bodily injury limits, but was reduced on the insured's express request in return for a reduction in premium. The court held that Wood was inapposite because in that case the policy was issued with the reduced limits before execution of the rejection form. Isaacson, 328 Ill.App.3d at 986, 263 Ill.Dec. 136, 767 N.E.2d 862. A postissuance endorsement to a valid policy is not necessarily prohibited by any statute and, indeed, that alternative was recognized as valid in Wood, where the court observed: Moreover, once the rejection form had been executed, National could have issued an addendum or a new policy reflecting the change in [uninsured/underinsured-motorist] limits. Wood, 324 Ill. App.3d at 588, 258 Ill.Dec. 225, 755 N.E.2d 1044. Here, Deere did not use either alternative. Therefore, the untimely rejection had no effect. While Deere argues that the application process was ongoing and that the return of the rejection form was part of this process, there appears to be no justification for Deere to issue the policy before receipt of the selection/rejection form. Under the plain language of the statute, Deere could not have lawfully issued the policy without uninsured/underinsured-motorist coverage equal to the bodily injury limits. Accordingly, these limits were in effect when the insured's employee was killed in a covered accident. For Lin's rejection of the additional coverage to be effective, Deere's two-step application process must have been completed before the issuance of the policy. In the absence of a complying rejection, Deere was in violation of the statute when it issued the policy, and no subsequent rejection of the additional coverage could have been valid unless of course, as in Isaacson, the additional coverage was provided under the original policy. Finally, we address the practicality arguments urged by Deere and its amicus. The application process began with a telephone call from Lin to Amwoza at Elite. Amwoza obtained the information he needed to secure a quote and then submitted the application, unsigned, to Deere on Lin's behalf. Deere and its amicus note that this practice is common in the insurance industry and argue that it is commercially reasonable. The trial court found that reformation of the policy was required because the application submitted by Elite contained no signature or initials indicating rejection of the additional coverage. Deere and its amicus contend that if the trial court's ruling were upheld, applicants could no longer quickly obtain coverage, as might be necessary in many situations, by means of a temporary binder of insurance procured by telephone. This is an argument better addressed to the legislature. Given our disposition of this case, however, the concerns of Deere and its amicus are not well founded. Our holding is not based on the lack of a signature on the application form submitted on Lin's behalf by Elite. Rather, the result we reach is compelled because the rejection of coverage equal to bodily injury limits did not occur during the application process while the temporary binder was in effect. This case does not require us to determine whether the binder must initially include the higher coverages. Not until after the insurance policy was issued with uninsured/underinsured motorist limits at the statutory minimum was the selection/rejection form completed by Lin. Since Lin was no longer an applicant, this procedure clearly was not authorized by the statute. The trial court properly granted summary judgment to Lee.