Many insurance companies now offer you the chance to buy auto insurance
over the phone or through a website. Companies like Geico and Progressive
have aggressively marketed these online buying systems. Geico claims one
can buy insurance and save money in 15 minutes, while Progressive touts
a name-your-price online buying tool.
When you use these systems, you don’t ever meet an agent, and you
don’t ever sign a form in person.
Everything is done over the phone or through mouse clicks, and you pay
with a credit card. It’s undoubtedly an easy way to get coverage.
However, there’s a serious question about whether these online buying
routines actually do what Florida auto insurance law requires. To understand
why that is, we have to take a step back to review auto insurance generally,
and uninsured motorist coverage in particular.
In an ideal world, everyone would carry insurance to protect other people
from their negligent acts. People who cause car crashes would have liability
insurance to cover the damages they cause when they make mistakes out
on the road.
Unfortunately, Florida law doesn’t require the general population
of drivers to carry liability insurance. So people don’t always
carry enough liability insurance - or any liability insurance at all.
That’s why we have something called “uninsured motorist”
coverage (UM). This coverage, as the name suggests, kicks in to cover
your damages when someone without insurance causes a wreck. It’s
provided by your own insurance company, and is the flipside of the liability
insurance you buy to protect others from your own mistakes.
Florida law makes UM a critical coverage. In fact, every auto policy issued
in Florida which provides liability insurance has to provide UM insurance
too. The only way that
doesn’t happen is if the insurance customer specifically declines UM. To do that,
the customer has to sign a “rejection form” which tells them
exactly what they’re giving up. If you buy a restricted form of
UM coverage called “nonstacking” UM, you have to complete
a form indicating that too.
Insurance companies sometimes fall down on the job when it comes to getting
these forms signed. Sometimes the signed forms would get lost, or an insurance
company would never get them signed in the first place. We have successfully
made UM claims for clients in those situations for years.
Now we have online and phone-based insurance buying in the mix. While convenient,
these processes creates problems of its own when it comes to UM.
If an insurance representative tries to explain UM coverage over the phone,
the explanation you get may be superficial or downright inaccurate. UM
coverage can get tricky, and some insurance representatives don’t
truly understand it themselves. We have heard of insurance representatives
telling people not to buy UM because they don’t own multiple cars,
or because their own car is old. Neither of these things have much to
do with the protection UM provides, but they could certainly deter a potential
customer who doesn’t know better.
Thus, this process can result in the customer never getting a fair chance
to accept or decline UM insurance. An insurance buyer may just get swept
through the insurance buying process without understanding how valuable
UM could be for them.
Of course, this has resulted in some recent legal challenges to electronic
or telephonic sign-up processes. Lawyers in our line of work have argued
that the shortcomings in these systems require insurance companies to
provide UM coverage by default.
Insurance companies have responded by claiming the failure to obtain signed
forms doesn’t really make a difference. In other words, they claim
their customers wouldn’t have bought UM insurance even if they had
been fully informed, because they would consider it unnecessary, too expensive,
etc. In effect, the insurance companies have tried to prove an “oral
rejection” of UM coverage.
A critical court decision on this issue came out this week. In a case involving
Geico, a south Florida appeals court ruled that the law still requires
insurance companies to get signed UM rejection forms. The court refused
to allow an “oral rejection” defense as a fallback position.
Basically, the court just said the insurance companies have to do what
the law says they have to do. It recognized that allowing exceptions would
defeat the whole purpose of the law.
After wryly observing that the average insurance customer would find thinking
about UM “as enjoyable as a dramatic reading from the Internal Revenue
Code,” the court said:
To allow an insurance company to prove that an insured orally and knowingly
rejected stacked coverage in the absence of the [written rejection form]
notice would undermine the legislature’s determination that such
written notice is mandatory.
This is a big deal. Again, many insurance companies offer online insurance
purchasing. Thousands of customers could be affected. They might be eligible
for this coverage even if they never actually purchased it, because they
were never told how it could protect them.
In the meantime, no one should lose any sleep worrying about the poor insurance
companies. No one is above the law. The court’s opinion just recognizes
that insurance companies should not benefit financially from failing to
do what our laws require.