In North Carolina, a motor vehicle liability insurance policy
is required to provide UM and UIM coverage unless the insured has
rejected that coverage. N.C. Gen. Stat. § 20-279.21 (2001).
Absent a valid rejection, a policy is deemed to include suchcoverage. State Farm Mut. Auto. Ins. Co. v. Fortin
, 350 N.C. 264,
269, 513 S.E.2d 782, 784 (1999).
This appeal requires us to consider what constitutes a valid
rejection of UIM coverage. N.C. Gen. Stat. § 20-279.21(b)(4)
(emphasis added) is the controlling statute and provides:
"Rejection of or selection of different coverage limits for
underinsured motorist coverage for policies under the jurisdiction
of the North Carolina Rate Bureau shall be made in writing by the
named insured on a form promulgated by the Bureau and approved by
the Commissioner of Insurance
The parties do not dispute that Robbin Miller rejected
combined UM/UIM coverage in writing. They focus their arguments
instead on whether that rejection was "on a form promulgated by the
Bureau and approved by the Commissioner of Insurance." We hold
that it was not.
In response to N.C. Gen. Stat. § 20-279.21(b), as amended in
1991, the Rate Bureau promulgated and the Commissioner approved two
revised forms for selection and rejection of UM or combined UM/UIM
coverage: NC 01 85 (Ed. 7-91) for new policies and NC 01 86 (Ed.
7-91) for renewal policies. Fortin
, 350 N.C. at 269-70, 513 S.E.2d
at 785. Since the Millers were entering into a new policy, their
rejection of combined UM/UIM coverage was required to be on form NC
01 85 (Ed. 7-91).
Form NC 01 85 (Ed. 7-91) is a one-page, 8 1/2 by 11 inch, form
printed in 12 point type with the text measuring 7 by 10 inches.
The rejection at issue here has virtually identical language to
Form NC 01 85 (Ed. 7-91), substituting only the word "Erie" for"company" and "insured" for "named insured." Erie, however, shrunk
the promulgated form and then included it as box 17 in another
form, its application. The text of box 17 is 2 1/2 by 4 inches and
it appears to be printed in 5.5 point type.
Erie first contends that its rejection complies with N.C. Gen.
Stat. § 20-279.21 because it uses the same words as the promulgated
form and because the statute does not require that the rejection be
in a separate document. This argument disregards the plain
language of the statute. The statute requires that the rejection
be "on a form promulgated by the Bureau." The Bureau created and
the Commissioner of Insurance approved form NC 01 85 (Ed. 7-91).
The Millers' rejection is not on the form promulgated by the
Bureau, but rather is included in box 17 on an unrelated
application form created by Erie. Nothing in the statute or in any
administrative ruling authorizes an insurer to merge an unrelated
form with the approved Rate Bureau selection/rejection form.
Erie references a leading insurance treatise in arguing that
it is appropriate to include a rejection as part of an application
9 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d
§ 122:57, at 122-108 (1997) ("Form rejections are often included in
the application for insurance."). Erie has, however, overlooked
the fact that North Carolina's statute, requiring insurers to use
a specified form, is unusual. See
2 Irvin E. Schermer, Automobile
Liability Insurance 3d
§ 36.04, at 36-6 (1995) ("The rejection
provisions of the statutes contain numerous dissimilarities of
structure and detail relative to . . . the nature and form of
rejection . . . ."). Other states requiring that the rejection bein writing either do not specify what form the writing must take or
provide that the rejection is to be on a form furnished by the
. See, e.g.,
Ark. Code Ann. § 23-89-403 (Supp. 2003) (UM
coverage not required when insured "has rejected the coverage in
writing"); Del. Code Ann. tit. 18, § 3902(a)(1) (1999) (coverage
must be rejected "on a form furnished by the insurer"). The
authors of Couch on Insurance
point out that "[w]here the use of
the statutory form is expressly required, and no provision is made
for alteration, addition, or modification, strict adherence with
the form is required." 1 Russ & Segalla, supra,
§ 17.13, at 17-21
(1997). Because North Carolina by statute requires the use of a
particular form and neither the statute nor any administrative
ruling by the Commissioner of Insurance has provided for
modification of the format of that form, Erie was required to
strictly adhere to the required format.
This requirement of strict adherence has already been adopted
by our Supreme Court. In Fortin
, the insurer used a renewal form
that was virtually identical with NC 01 86 (Ed. 7-91); it added
only a single line specifying the insured's current UM coverage
limits. As Justice Parker stated in her dissent, "[i]n my view,
the State Farm form . . . included the exact same language as NC
Form 01 86 . . . ." 350 N.C. at 275, 513 S.E.2d at 788.
Nevertheless, the majority concluded "that the State Farm version
of renewal form NC0186 [sic] that [the insured] executed in January
1992 was not the 'form promulgated by the North Carolina Rate
Bureau and approved by the Commissioner of Insurance.'" Id.
269, 513 S.E.2d at 784. The Court continued: "We note furtherthat the statute specifically provides that rejection 'shall be
made in writing' on the approved form." Id.
Prior decisions of this Court have reached a similar
conclusion. In Hendrickson v. Lee
, 119 N.C. App. 444, 455, 459
S.E.2d 275, 281 (1995), the insurer argued as Erie does here, that
"use of the precise form promulgated by the Rate Bureau was not
required." This Court disagreed, noting that the statute was
"concerned with avoiding confusion and ambiguity through the use of
a single standard and approved form." Id.
at 456, 459 S.E.2d at
282. Likewise, in Sanders v. American Spirit Ins. Co.
, 135 N.C.
App. 178, 186, 519 S.E.2d 323, 328 (1999), because of the need for
a single standard form, this Court found a rejection of UIM
coverage ineffective when the form, although otherwise identical
with the Rate Bureau form, omitted the word "combined."
issuing insurance policies outside the jurisdiction of the Rate
Bureau may the insurer "permissibly use its own form for
selection or rejection of underinsured motorist coverage."
Hlasnick v. Federated Mut. Ins. Co.
, 136 N.C. App. 320, 325, 524
S.E.2d 386, 389, aff'd in part on other grounds,
353 N.C. 240, 539
S.E.2d 274 (2000).
In arguing that its "form" is identical with the Rate Bureau
form, Erie points to the fact that the statute does not include any
size requirements for the form. There was, however, no need for
the General Assembly to do so. It authorized the Rate Bureau to
design the form subject to the approval of the Commissioner. It
was, therefore, up to the Rate Bureau to determine the proper print
size and overall size of the form. When it promulgated its form,it was Erie's responsibility to print rejection/selection forms
that matched that form.
In addition, the Readable Insurance Policies Act, enacted in
1979, mandated long ago that "[a]ll insurers are required by this
Article to use policy and contract forms and, where applicable,
benefit booklets . . . that are printed in a legible format." N.C.
Gen. Stat. § 58-38-5 (2001). More specifically, N.C. Gen. Stat. §
58-38-20(a) (2001) requires that all insurance policies and
contracts providing private passenger nonfleet motor vehicle
insurance "must be printed in a typeface at least as large as 10
point modern type, one point leaded . . . ."
Erie relies primarily on an unpublished 16 March 1999
decision, Erie Ins. Exchange v. Bordeaux
, COA98-773 (N.C. App. Mar.
1999). Unpublished decisions are not, however, controlling
authority. N.C.R. App. P. 30(e). That decision did not have the
benefit of Fortin
, which were both decided several
months later and mandate use of the single, standard form
promulgated by the Rate Bureau. Moreover, the unpublished decision
assumed that "[o]ur statutes do not require the selection/rejection
form to contain specific font sizes . . . ." Apparently, the
parties did not direct the Court's attention to N.C. Gen. Stat. §
58-38-20 with its 10-point limitation.
Erie also points to Blackburn v. State Farm Mut. Auto. Ins.
, 141 N.C. App. 655, 540 S.E.2d 63 (2000), disc. review denied,
353 N.C. 369, 547 S.E.2d 409 (2001), as support for its position.
, however, the insurer had added to the standard Rate
Bureau form language further explaining UM and UIM coverage. Inconcluding that this rejection/selection form was valid despite the
additional explanatory language, the court relied upon the fact
that "the Rate Bureau and Department of Insurance expressed in 1991
their approval of a selection/rejection form that '[a]dd[s]
explanations of [UM] and/or combined [UM/UIM] coverages' which
otherwise complies with the form promulgated by the Rate Bureau and
approved by the Department of Insurance." Id.
at 657, 540 S.E.2d
at 64. The Court concluded that the additional language "comports
with the authorization given by the Rate Bureau and the Department
of Insurance. Therefore, we conclude as a matter of law that this
additional language does not render invalid the selection/rejection
form executed by [the insured.]" Id.
at 659, 540 S.E.2d at 65.
Erie bore the burden of establishing the validity of the
Millers' rejection of coverage. Hendrickson
, 119 N.C. App. at 450,
459 S.E.2d at 279. Here, Erie offered no evidence that the Rate
Bureau or the Commissioner of Insurance has authorized it to
include the rejection/selection form in its application or to print
it in tiny type. As Erie has failed to show that its modification
of the Rate Bureau form was authorized or approved, it has failed
to establish that the Millers validly rejected UIM coverage.
Because there was no valid rejection of UIM coverage, UIM
coverage was included in the policy in accordance with the
provisions of N.C. Gen. Stat. § 20-279.21(b)(4) as amended in 1991.
The parties have not addressed the amount of that coverage and we
leave that determination for the trial court.
Reversed. Chief Judge EAGLES and Judge MARTIN concur.
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