Olender v. National Casualty Company, et al., No. 11-4098 (E.D. Pa., Aug. 21, 2012)

UIM selection/rejection form, when taken as a whole, did not manifest a knowing intentional desire to purchase reduced UIM coverage; thus, higher limits applied.

The Eastern District Court of Pennsylvania considered whether an insured's underinsured motorist coverage was $35,000 or $100,000 following a motor vehicle accident. The insurer's position was that the limits were $35,000 since the insured had executed a UIM selection/rejection form for lower than his liability coverage. The insured argued that the coverage was really $100,000 since he had signed both a form selecting UIM motorist coverage equal to liability coverage, as well as a portion of the same form signing and initialing the lower coverage of $35,000. The court agreed with the insured that "the selection/rejection form, taken as a whole, cannot be said to manifest a knowing and intentional desire to purchase reduced UIM coverage." The court determined that there were two elections made – one for equal coverage and the other for lower coverage. Since there were two different interpretations, the ambiguity must be resolved in favor of the insured. Thus, the insured was awarded $100,000 in UIM coverage. However, the insurer was granted summary judgment with regard to the plaintiff’s bad faith claim. The insurer had refused to tender the undisputed $35,000 absent a signed release from additional liability. The court reasoned that the insurer’s position regarding the policy limits was in good faith; thus, the bad faith claim must fail. The primary significance of this case lies with the general proposition that when an ambiguity arises in an insurance coverage dispute, that ambiguity will be construed in favor of the insured rather than the insurer. Unless it is clear that the insured intended to select lower UIM coverage, any ambiguity to the contrary will be resolved in the insured’s favor.

Case Law Alert - 1st Quarter 2013