Insurer's Duty to Provided a Description of UM Coverage and Also An Opportunity to Reject the Coverage
Is it the Insurer's Duty that an Applicant be Provided with a Description of UM Coverage and Also an Opportunity to Reject the Coverage ?
In Wood v. National Liability & Fire Insurance Co., 324 Ill. App. 3d 583, 755 N.E.2d 1044, 258 Ill. Dec. 225 (2001), the Court considered whether an insured's rejection of equal UM coverage, made after the policy was first issued, was effective to discharge the insurer's obligations under section 143a-2.
The Court held that it was not, because section 143a-2 was intended to ensure that persons are provided information regarding the availability of UM coverage above the statutory minimum before they decide the amount of coverage they wish to have. Wood, 324 Ill. App. 3d at 587.
In reaching this conclusion, we relied heavily on section 143a-2's use of the word "applicant," to describe the persons to whom insurers must explain UM coverage and from whom insurers must obtain signed rejections, and the word "application," to describe where the space for indicating a rejection of additional UM coverage was to be located. Wood, 324 Ill. App. 3d at 586.
Moreover, under the structure of the statute, an insurer may not issue a policy with UM coverage limits lower than those for liability coverage unless the insurer has obtained a signed rejection.
Thus, for a rejection to be effective, it must have been received before the policy was issued. Wood, 324 Ill. App. 3d at 587.
The Court went on to state:
"It 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.'
Before the change, the 'insured' had the right to elect or reject UM coverage.
In its present form, the statute 'leaves no room for doubt as to whom UM coverage must be explained.'
We believe that the revision makes it clear that the applicant, not the insured, be provided with a description of the UM 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.