Insurer Had to Make Meaningful Offer of UIM in Commercial Policy

NEWS ARTICLE EXCERPT

South Carolina Lawyers Weekly, August 29, 2005

Insurers must make a meaningful offer of underinsured motorist coverage even when selling policies to sophisticated corporations that have repeatedly rejected the optional coverage, the Supreme Court has ruled in response to certified questions from federal court.

The ruling sends the case back for a ruling on whether a meaningful offer was made. If not, it could open the door for up to $1 million in UIM coverage for the estate of a trucker killed in a 2002 wreck.

In an Aug. 22 decision, the justices said that Old Republic Insurance Company was required to make a meaningful offer of UIM coverage to Penske Truck Leasing when it sold the company a "fronting policy" - a contract where the deductible matches the liability limits.

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"It's a big case," said the plaintiff's attorney Richard A. "Dick" Harpootlian of Columbia.

"It's very significant in the sense that the trucking industry has developed this fronting policy scam, I would call it, to get the benefits of being self-insured without really being self-insured," Harpootlian told Lawyers Weekly.

"Our Supreme Court says, "If you're going to go through this process of saying that you're insured, then you have to do everything you're supposed to do if you're insured," he said.

"There was not a lot of law on the offer of UM/UIM in the commercial context and no law on the offer of UM/UIM in the commercially exempt policies or in this fronting policy context," according to Harpootlian.

"Penske has 200,000 vehicles, and this ruling means in South Carolina that they're going to dot every 'i' and cross every't' and make sure they make meaningful offers of UM and UIM. I think it raises huge questions about whether this fronting policy contraption will actually [past muster in a number of different ways," he said.

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