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Government Employees Insurance Company v. Graham-Gonzalez (02/18/2005) sp-5869
Government Employees Insurance Company v. Graham-Gonzalez (02/18/2005) sp-5869
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
GOVERNMENT EMPLOYEES INSURANCE)
COMPANY and MICHAEL J. LINA, JR., ) Supreme Court Nos. S-
10666/10755
)
Petitioners/ )
Cross-Respondents, ) Trial Court No.
) 3AN-00-12188 CI
v. )
)
SANDRA GRAHAM-GONZALEZ, )
)
Respondent/ )
Cross-Petitioner. )
)
)
STATE FARM MUTUAL AUTOMOBILE ) Supreme Court No. S-10691
INSURANCE COMPANY, )
)
Petitioner, )
) Trial Court No.
v. ) 3AN-01-03998 CI
)
MAURITA RENE BOZINOFF, for herself )
and as the Natural Mother and Next Best ) O P I N I O N
Friend of Hannah Nicole Bozinoff, a minor, )
)
Respondents. ) [No. 5869 - February 18,
2005]
)
Petitions for Review from the Superior Court
of the State of Alaska, Third Judicial
District, Anchorage, Eric T. Sanders, Judge.
Appearances: Mark E. Wilkerson, Wilkerson &
Associates, and Gary A. Zipkin, Guess & Rudd,
P.C., Anchorage, for Petitioners/Cross-
Respondents GEICO. Mark A. Sandberg,
Sandberg, Wuestenfeld & Corey, and Dennis M.
Mestas, Anchorage, for Respondent/Cross-
Petitioner Graham-Gonzalez. Kimberlee A.
Colbo, Hughes Thorsness Powell Huddleston &
Bauman LLC, Anchorage, for Petitioner State
Farm. W. David Weed and LeRoy E. DeVeaux,
Anchorage, for Respondent Bozinoff. Alfred
Clayton, Jr., Bliss, Wilkens & Clayton,
Anchorage, for Amicus Curiae The National
Association of Independent Insurers. Neil T.
ODonnell and W. Michael Moody, Atkinson,
Conway & Gagnon, Anchorage, for Amicus Curiae
Cheryl Hensel. David W. Pease, Burr, Pease &
Kurtz, Anchorage, for Amicus Curiae Integon
Indemnity Corporation.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
MATTHEWS, Justice.
FABE, Justice, with whom BRYNER, Chief Justice, joins,
dissenting.
I. INTRODUCTION
Alaska Statute 21.89.020(c) states that insurers shall
. . . offer coverage for protection against uninsured and
underinsured motorists (UIM) ranging from $50,000 to $1,000,000
for injury or death of one person. The question presented in
these cases is whether application forms which set out the
various levels of coverage that are available but do not state
the amount of the premium that must be paid violate this statute.
We answer no for reasons based on our case law, the common
meaning of offer, indications of what the statute requires in
another subsection and in the legislative history, and the
approval of similar application forms by the Division of
Insurance.
II. STATEMENT OF FACTS
A. GEICO v. Graham-Gonzalez
The superior court in its order granting partial
summary judgment to Graham-Gonzalez set forth the underlying
facts as follows:
On June 20, 1996 Sandra Graham-Gonzalez
was a passenger in a car driven by her
sister, Christine Ivanoff. At the
intersection of Abbott Road and Lake Otis
Parkway, Ivanoff turned into the path of an
oncoming van. As a result of the collision,
Graham-Gonzalez sustained serious injuries.
The car that Ivanoff was driving at the time
of the accident was owned and insured by her
mother, Judith Martin; GEICO insured the
vehicle.
Graham-Gonzalez settled her liability
claim for the policy limits, and then
presented a claim for underinsured motorist
benefits under the GEICO policy. GEICO
thereafter tendered to Graham-Gonzalez what
the insurer considered to be the full UIM
policy limits, with interest and attorneys
fees. GEICO agreed that by accepting the
check, Graham-Gonzalez was not waiving her
right to assert that the coverage was greater
than the amount stated in Martins insurance
policy. Graham-Gonzalez then filed this
lawsuit.
After reviewing the pleadings submitted
by the parties, the court makes the following
factual findings.
1. Judith Martin applied for an
automobile liability insurance
policy from GEICO Indemnity in
February 1993. At that time GEICO
recommended to Martin that she
carry UIM coverage limits equal to
the limits of her bodily injury
liability coverage.
2. The Selection Form gave Martin the
opportunity to reject UIM coverage,
or to select from a range of
coverage limits up to
$1,000,000/$2,000,000.
3. At that time Martin selected UIM
coverage equal to her bodily injury
liability coverage, which was
$50,000/$100,000.
4. During the time between July 1993
and January 1995, GEICO sent Martin
a policy renewal package that
included a Premium Statement,
Declaration Pages, and Vehicle
Page.
5. The information Martin received
during this time showed that she
was paying for certain coverages,
including the UIM coverage.
6. During this time Martin
consistently selected
$50,000/$100,000 UIM coverage.
7. To save her money on premiums,
Martins coverage was changed to
GEICO in March 1995; at that time
she received a new policy number.
The new number was 719-39-03.
8. In March 1995 Martin received a
Selection Form that, like previous
forms she had received, presented
the option of selecting limits
higher than $50,000/$100,000. The
Selection Form was M-316 AK.
9. In April 1995 Martin received a
packet from GEICO that set forth
her coverage limits and the cost
for each coverage; this included
the price she would pay for her UIM
insurance.
10. Between April 1995 and May 1996
Martin received information and
renewal packets from GEICO. Martin
was routinely informed that she had
$50,000/$100,000 UIM coverage, and
was informed of the cost of that
coverage.
11. During the time that she was
insured by GEICO, Martin did not
make any changes to her UIM limits.
12. Policy number 719-39-03 was the
policy in effect on the day of the
accident involving Graham-Gonzalez.
13. Martin understood that if she
selected higher limits for UIM
coverage, she would have to pay
more to GEICO.
14. None of the forms or papers GEICO
provided to Martin prior to the
accident contained the cost of the
optional limits for UIM coverage.
15. None of the forms or papers GEICO
provided to Martin prior to the
accident advised Martin that the
optional limits for UIM coverage
could be obtained by paying
relatively modest premium
increases.
16. Neither Martin nor her insurance
agent, Win Fowler, can recall
discussing the cost of optional UIM
coverage.
17. There is no evidence that Fowler or
any other GEICO representative
verbally furnished Martin the cost
of the optional higher limits set
forth in Form M-316 AK.
18. GEICO did not orally present to
Martin the cost of the optional
limits for UIM coverage prior to
June 20, 1996.
19. The premium for automobile
liability coverage is set based
upon the insurance risk. As a
consequence, insurance companies in
Alaska cannot, and do not,
establish a rate for all
policyholders who want certain
coverage. For example, a young
driver with numerous speeding
tickets and accidents would pay
more for liability coverage than a
fifty-year-old driver with a
spotless record.
20. Unlike liability insurance,
insurance companies can establish a
premium for all policyholders who
seeks [sic] the same UIM coverage.
21. GEICO now provides its
policyholders in Alaska with a form
that indicates the premium price
for optional limits of UIM
coverage.
22. The GEICO UIM coverage form that
provides information concerning
cost of coverage now states:
Uninsured and Underinsured Motorist Bodily Injury Coverage
Coverage Limit Premium Premium
Per Person/Per 1st 2nd Vehicle
Accident Vehicle
() $50,000/$100,000 $ $
31.20 24.90
() $100,000/$200,000 $ $
40.20 32.20
() $100,000/$300,000 $ $
44.90 35.90
() $300,000/$300,000 $ $
55.80 44.60
() $250,000/$500,000 $ $
58.30 46.60
() $300,000/$500,000 $ $
59.20 47.40
() $500,000/$500,000 $ $
64.20 51.30
() $500,000/$750,000 $ $
67.60 54.10
() $500,000/$1 MIL $ $
72.30 57.80
() $1MIL/$1MIL $ $
83.80 67.00
() $1MIL/$2MIL $ $
91.70 75.70
I do not want Uninsured and Underinsured
Motorist Bodily Injury coverage for my
vehicles. Rejection of this coverage must be
in writing.
(Footnote omitted.)
B. State Farm v. Bozinoff
Kenneth Bozinoff purchased automobile insurance from
State Farm Mutual Automobile Insurance Company (State Farm) in
August 1997. State Farm presented him with a UIM application
form similar to that used by GEICO. The form listed the six
optional levels of coverage required by AS 21.89.020(c). The
form did not list the premium for each level of coverage.
Kenneth Bozinoff checked the box opposite coverage limits of
$100,000/$300,000.
Shortly before February 11, 1998, State Farm sent
renewal forms to Kenneth Bozinoff. The renewal forms contained
an insert that included a chart indicating the premiums for the
various levels of UIM coverage. According to Kenneth Bozinoff,
he did not receive the renewal information because it was sent to
his tax advisers address. Kenneth Bozinoff renewed his policy on
February 11, 1998, for the same levels of coverage that he had
purchased previously, $100,000/$300,000. On June 13, 1998,
Kenneth Bozinoffs daughter, Maurita Bozinoff (Bozinoff), was
involved in a serious automobile accident in which the other
driver, an underinsured motorist, was negligent. Bozinoff
brought suit in superior court against State Farm for the maximum
amount of UIM coverage mandated under AS 21.89.020(c), less what
she had already received from the negligent driver.
III. COURSE OF PROCEEDINGS
In Graham-Gonzalez v. GEICO, both parties moved for
partial summary judgment on the issue of whether GEICOs
procedures complied with AS 21.89.020(c). GEICO argued that the
word offer in the statute meant notify as to availability. Graham-
Gonzalez argued that offer as used in the statute was a term of
art and should be understood to mean what the word means when
contract formation is described. She relied on Spenard Plumbing
& Heating Co. v. Wright, in which we stated:
Professor Corbin defines an offer as an
expression by one party of his assent to
certain definite terms, provided that the
other party involved in the bargaining
transaction will likewise express his assent
to the identically same terms. The making of
the offer, he points out, creates a power of
acceptance in the offeree, and once the offer
has been made there is nothing left for the
offeror to do but to wait for the offeree to
close the contract.[1]
Using this approach Graham-Gonzalez argued that offer required
communication of the price for each of the levels of coverage.
The superior court held that insurers are required to
include the cost of coverage at each level in the initial
application forms because the offer must be presented in a manner
reasonably calculated to permit the customer to make an informed
decision of whether to purchase UIM coverage at the mandated
levels . . . . The court ruled that the remedy for GEICOs
noncompliance with the offer requirement was that the
policyholder (Judith Martin) would have the opportunity to choose
any level of mandated coverage and that the coverage so chosen
would apply retroactively to the accident.
We granted GEICOs petition for review from these
rulings.2
In Bozinoff v. State Farm, State Farm moved for summary
judgment, seeking a declaration that it had complied with AS
21.89.020(c). Bozinoff opposed the motion. The superior court
denied State Farms motion for summary judgment, concluding that
the initial application forms presented to Kenneth Bozinoff in
August of 1997 did not comply with the statute. The court also
ruled that the renewal forms that State Farm sent to Kenneth
Bozinoff in 1998 did comply with the statute but that there was a
question of fact as to whether Kenneth Bozinoff received these
forms prior to the accident.
State Farm petitioned for review from these rulings.
We granted its petition and consolidated its case with that of
GEICO.
IV. DISCUSSION
The dispute in these cases centers on the meaning of
the requirement in AS 21.89.020(c) that an insurance company
shall . . . offer UIM coverage at various specified limits as
part of an automobile liability insurance policy. We set out the
full text of AS 21.89.020(c), and (e) because it bears on the
meaning of (c) in the margin.3
The insurers argue that the statutory offer requirement
has two components: (1) insurers must make the mandated coverage
available; and (2) they must notify their prospective customers
of its availability. The insureds argue that the statute also
requires insurers to provide price information in their initial
application forms.
The question before the court is one of statutory
interpretation. We have summarized the approach we take on
questions of statutory interpretation as follows:
In construing the meaning of a statute,
we look to the meaning of the language, the
legislative history, and the purpose of the
statute in question. The goal of statutory
construction is to give effect to the
legislatures intent, with due regard for the
meaning the statutory language conveys to
others. Because this is a case of first
impression in this state, [o]ur duty is to
adopt the rule of law that is most persuasive
in light of precedent, reason, and policy.
. . . .
We have rejected a mechanical
application of the plain meaning rule in
matters of statutory interpretation, and have
adopted a sliding scale approach instead.
The plainer the statutory language is, the
more convincing the evidence of contrary
legislative purpose or intent must be.
In assessing statutory language, unless
words have acquired a peculiar meaning, by
virtue of statutory definition or judicial
construction, they are to be construed in
accordance with their common usage.[4]
In our view the shall offer language of AS 21.89.020(c)
requires that each insurer must make available to its prospective
customers the mandated levels of UIM coverage. This means that
insurers must notify prospective customers that they will sell
such coverage. And since coverage would not truly be made
available if an insurer refused to quote a price for it, the
statute requires at least that prices be furnished upon request.
But does the statute require that the initial form notifying
customers of the availability of coverage include the price for
each level? We conclude that it does not for the reasons that
follow.
Alaska Statute 21.89.020(c) does not prescribe how
insurers should notify their prospective customers of available
coverage or direct any particular form for such notice. In Peter
v. Schumacher Enterprises, Inc., we held that offers required to
be made under .020(c) did not have to be in writing:
Alaska Statute 21.89.020(c) clearly
requires that policy purchasers be offered
the sets of optional limits described in
subsection .020(c)(2). But Peter contends
that such offers must be in writing. Finding
no textual basis for this argument, we reject
it. But there is an unresolved factual
question as to whether the availability of
the optional limits prescribed by subsection
.020(c) was communicated in any form to [the
insured].[5]
Since the methods by which coverage is to be offered are not
dictated by the statute not even to the extent that offers must
be in writing it follows that the statute does not require that
insurers quote premium prices when they first mention that
multiple levels of coverage are available. Here, as in Peter,
there is no textual basis for the argument that the statute
imposes the particular formal requirement that the price be
stated at the outset of the process leading to the sale.
The meaning of the verb offer in common usage in the
context of the sale of a product is to make available or
accessible.6 The general to make available usage was illustrated
in Peter. With reference to the requirements of subsection
.020(c), we noted that there were fact questions as to whether
the availability of the optional limits . . . was communicated in
any form . . . .7 This usage does not connote that the price of
the item made available for sale must necessarily be stated in
the initial communication of the availability of the item. The
media are replete with advertisements announcing the availability
of goods and services that do not state prices.
Subsection (e) of .020 also indicates that offer in
subsection (c) was meant to describe a process of making coverage
available and giving notice of availability. The second sentence
of (e) exempts insurers from the offer requirement of (c) on
policy renewals once the insured has either waived UIM coverage
altogether or selected a level of coverage. In the process it
describes what (c) requires. The second sentence provides in
relevant part: After selection of the limits by the insured or
the exercise of the option to waive the coverage . . . the
insurer is not required to notify any policyholder in any renewal
. . . policy, as to the availability of the coverage or optional
limits . . . . (Emphasis added.) It follows from this language
that before limits are selected or waived the insurer is required
to notify customers as to the availability of the coverage and
optional limits. Thus it seems that in (e) the legislature
described the acts that it contemplated insurers must fulfill
under (c), when the exempting conditions of (e) are not present.
The legislative history of AS 21.89.020(c) also
indicates that the legislature contemplated that offer would mean
make available and give notice of availability. Subsections (c)
and (e) were enacted in 1984. Subsection (e) has remained
unchanged. But subsection (c) originally only required that
insurers shall offer [UIM coverage] with limits equal [to the
liability limits selected by the insured]. This was changed in
1990 when the requirement that at least six levels of UIM
coverage be offered was added. According to the minutes of the
House Labor and Commerce Committee, this was done to ensure that
members of the public would have the option to purchase at least
one million dollars coverage of underinsured and uninsured
motorist coverage.8 During a committee meeting considering this
amendment, an insurance company lobbyist suggested amending the
shall offer language in .020(c) to shall make available in order
to alleviate vagueness as to when to make the offer.9
Representative Donley, the prime sponsor of the bill, rejected
this suggested change. According to the minutes:
Chairman Donley told Mr. Frank that regarding
his recommendation to change shall offer to
shall make available, the wording shall offer
compels the insurer to offer the insurance to
the insured whereas if the insurer only has
to make it available it may not get
mentioned. Rep. Gruenberg concurred.[10]
Thus Representative Donley recognized that the offer requirement
had two components: the coverage had to be made available and it
had to be mentioned. This is what subsection (e) implies that
the offer requirement in subsection (c) means. To change offer
in (c) to make available would potentially eliminate the notice
component described in (e). This history therefore supports the
view that the legislature intended that the offer language of
subsection (c) would mean what subsection (e) implies that it
means. Insurers must not only make each level of mandated
coverage available, they must also notify insureds as to the
availability of each level of coverage. But absent from the
legislative history is any suggestion that the legislature
intended that the premium for each optional level of coverage
would have to be quoted as part of the offer.
Although AS 21.89.020(c) does not purport to regulate
the forms insurers may use in soliciting coverage, such forms are
subject to state regulation. Alaska Statute 21.42.120(a)
requires that application forms that are to become part of a
policy must be filed with and approved by the director of the
Division of Insurance. Alaska Statute 21.42.130(1) requires that
the director disapprove a form that is filed that is in any
respect in violation of or does not comply with [Title 21 of the
Alaska Statutes]. At the request of GEICO we have taken judicial
notice that the Division of Insurance has approved application
forms submitted by insurers and by agencies serving insurers
that, like the applications at issue in this case, list the
various levels of coverage required but do not state the premium
that will be charged for each level of coverage.11
The parties differ as to the weight that this court
should give to the divisions approvals. GEICO argues that we
should give substantial deference to the approvals since the
legislature has delegated to the division the duty of enforcing
and administering the statutes concerning insurance. Graham-
Gonzalez, on the other hand, argues that the approvals have no
legal effect and that the court must exercise its independent
judgment to decide what AS 21.89.020(c) requires.
Typically we use the independent judgment standard on
questions of law unless the issue involves agency expertise or
the determination of fundamental policy questions on subjects
committed to the agency.12 This court has not ruled on whether
Division of Insurance approvals of forms under AS 21.42.120 and
.130 should be reviewed deferentially under the reasonable basis
standard or whether the court should substitute its judgment for
that of the division on the question whether forms comply with
the applicable statute. At least one other jurisdiction has
suggested that the more deferential standard is appropriate.13 If
we were to adopt the more deferential standard, the question
presented in this case would be readily resolved in favor of the
insurers, for it is plainly reasonable to interpret the statute
as not requiring that initial application forms contain premium
information. But even if the independent judgment standard were
applied, the divisions approval of forms like those used in the
present case would be entitled to some deference. In such cases
this court gives some weight to what the agency has done,
especially where the agency interpretation is longstanding.14 In
the present case it is unnecessary to determine which standard of
review should be applied because even if only some weight is
given to the approvals they are consistent with this courts view
as to what .020(c) requires.
The purpose of .020(c) is to give insureds various
options with respect to UIM coverage: to select coverage with
limits mirroring their liability limits, or with different
limits, or to waive coverage altogether. This purpose is not
frustrated by interpreting the subsection as not requiring
premium quotes to be included in application forms. Insureds can
be expected to ask for the prices of coverage they are interested
in.
Application forms would be more informative if they
contained premium information, and this is a factor that favors
the respondents position in these cases. But it is the only
factor. It is outweighed, in our judgment, by the reasons
pointing to the opposite conclusion outlined above. To
summarize, these are (1) that .020(c) does not impose formal
requirements as to the content of application forms and, as we
have previously held, does not require that the notification of
levels of coverage be in writing; (2) the common, nontechnical,
meaning of the word offer in a sales context is, in short, to
make available, a definition that does not require that the price
of the item to be sold be communicated in the initial
solicitation; (3) subsection .020(e) describes what is meant by
the offer requirement in subsection (c) consistent with the
common meaning coverage must be made available and notice of its
availability must be given; (4) the legislative history indicates
that the intended meaning of offer is the meaning reflected in
subsection (e) requiring both availability and notice of
availability of required levels of coverage; and (5) the Division
of Insurance in the exercise of its delegated authority to
regulate insurance company forms has with apparent consistency
approved of forms that do not set out the premiums for the
mandated levels of UIM coverage.
For these reasons we conclude that AS 21.89.020(c) does
not require that application forms state the premiums that would
be charged for each level of UIM coverage mandated by that
subsection.15 We thus REVERSE the decisions of the superior court
in these cases and REMAND for further proceedings consistent with
this opinion.
FABE, Justice, with whom BRYNER, Chief Justice, joins,
dissenting.
I disagree with the courts decision because I believe
that AS 21.89.020(c) requires insurers to inform customers about
both the availability and the relatively moderate pricing of UIM
coverage. Informing policyholders that additional UIM coverage
is available for only a small additional charge will prompt some
consumers who might not otherwise ask to seek specific
information about the cost of UIM insurance, thus helping them to
make informed decisions about their desired level of coverage.
This approach does not require insurance companies to list
specific prices for UIM coverage and therefore comports with our
holding in Peter v. Schumacher Enterprises, Inc. that UIM
insurance offers need not be in writing.1
I. What Constitutes a Meaningful Offer Under AS 21.89.020(c)?
The majority of jurisdictions that have considered
comparable statutes have concluded that insurance companies are
required to mention pricing when offering UIM coverage.2 In the
first of these decisions, the Minnesota Supreme Court held in a
case similar to this one that insurance companies must notify
policyholders that optional UIM coverage is available for only a
small additional charge.3 A number of other jurisdictions
followed suit.4 This trend is grounded in the conclusion of a
number of courts that statutory language mandating an offer
requires insurance companies to make meaningful offers so that
consumers can make informed choices about their preferred level
of coverage.5
The approach of the majority of the states that have
examined this question requiring some discussion of the cost of
UIM coverage as part of a mandatory offer comports with the
Alaska Legislatures purpose in enacting AS 21.89.020(c). The
provision reflects a broader effort on the part of the
legislature to ensure that victims of automobile accidents are
compensated for their injuries. In Peter, we observed that [t]he
legislature has concerned itself since 1984 with making UM/UIM
coverages available to the public,6 and looked to the
legislatures preamble to the Motor Vehicle Safety Responsibility
Act, which states:
The legislature is concerned over the rising
toll of motor vehicle accidents and the
suffering and loss inflicted by them. The
legislature determines that it is a matter of
grave concern that motorists be financially
responsible for their negligent acts so that
innocent victims of motor vehicle accidents
may be recompensed for the injury and
financial loss inflicted upon them.[7]
In light of this statement of purpose, and other provisions in
the Alaska Statutes mandating that drivers possess motor vehicle
liability insurance,8 AS 21.89.020(c) reflects an intent on the
part of the legislature to facilitate the purchase of UIM
coverage by policyholders. To this end, the legislature required
that insurance companies offer UIM coverage. To be meaningful,
the offer must be sufficiently detailed to allow policyholders to
make informed decisions about their desired level of coverage.
Alaska Statute 21.89.020(e), which requires a written
waiver of UIM insurance, illustrates that the legislature
intended to do more than merely require insurers to inform
consumers that optional UIM coverage existed. The written-waiver
language indicates that the legislature recognized that most
informed consumers would want UIM coverage; for this reason, the
legislature decided to treat all consumers as though they did
want the coverage unless insurers took the affirmative step of
avoiding the possibility of an uninformed waiver by securing an
express waiver in writing. As Judge Sanders reasoned in Graham-
Gonzalez v. GEICO, the offer of UIM coverage must be presented in
a manner reasonably calculated to permit the customer to make an
informed decision of whether to purchase [the additional]
coverage at the mandated levels, and this includes the cost of
the coverage.9
The court relies in part on minutes from a 1990
committee meeting where legislators rejected a proposal to change
the language in AS 21.89.020(c) mandating that insurance
companies shall offer UIM coverage to shall make available. The
court concludes that the decision to keep the shall offer
language indicates that the legislature intended to require
companies to notify insured parties about the availability of the
coverage, but not to inform them about the price. I find Judge
Sanderss interpretation of this legislative history in Graham-
Gonzalez10 to be more persuasive. Judge Sanders astutely
observed that litigation in other states formed the backdrop to
the Alaska Legislatures decision to keep the shall offer language
in the statute. In the years preceding the Alaska Legislatures
decision, courts in other states examined the meaning of shall
offer in comparable statutes. Several states concluded that
shall offer indicated an obligation on the part of insurers to
include pricing options as part of the offer.11 As Judge Sanders
concluded, it is likely that the Alaska Legislature was aware of
these decisions when it decided to retain the shall offer
language in the statute.
Because Judge Sanders was correct in his conclusion
that the offer of UM/UIM coverage in Graham-Gonzalez was
defective, this aspect of his decision should be affirmed. But
because State Farms notice in Bozinoff informed Bozinoff that UIM
coverage was available for a relatively modest increase in
premium, its offer was adequate.
II. What Is the Appropriate Remedy?
The court does not reach the question of how to remedy
an inadequate offer under AS 21.89.020(c) because the court does
not find the offers in these cases inadequate. Because I believe
that the offer in Graham-Gonzalez was inadequate, I would adopt a
two-part remedy granting Graham-Gonzalez the level of coverage
that Martin would have purchased had she received a proper offer
under AS 21.89.020(c). First, upon a finding that an insurer
failed to offer UIM coverage under AS 21.89.020(c), the policy
would automatically be imputed with UIM coverage limits equal to
the liability limits purchased. Next, the court would engage in
a fact-finding inquiry to determine whether the policyholder
would have purchased optional additional coverage above the
policys limits had the additional coverage been offered.
This remedy requires a two-fold reading of AS
21.89.020(c). Under AS 21.89.020(c)(1), insurance companies must
offer UIM coverage with policy limits equal to the limits
voluntarily purchased under the insureds liability coverage.
Under AS 21.89.020(c)(2), insurance companies must offer
additional optional UIM coverage with policy limits higher than
what the insured party carries in liability insurance. This
reading of the statute is consistent with our decision in Peter,
where we stated that Alaska Statute 21.89.020(c) requires
insurance companies to offer in automobile liability policies
UM/UIM coverage with minimum limits of $50,000 per person and
$100,000 per accident. In addition, subsection (c)(2) requires
that optional higher limits be offered up to
$1,000,000/$2,000,000.12 Thus, the two-part remedy affords the
policyholder the UIM baseline coverage that would likely have
been purchased if offered under AS 21.89.020(c)(1), with a
possibility of receiving the optional additional coverage that
might have been purchased if it had been offered under AS
21.89.020(c)(2).
Although I recognize Judge Sanderss concerns that such
a remedy might invite self-serving testimony on the part of
insured parties, we were fully aware in Peter that [w]hat [a
policyholder] would have done if higher limits had been offered
is a speculative subject. But it is a subject on which personal
and self-interested testimony is both admissible and necessary to
show a loss.13 Moreover, some of the problems created by such an
inquiry can be alleviated by placing part of the burden on the
violating insurance company. If the policyholder testifies that
he or she would have purchased a policy with a higher level of
coverage than the liability coverage, I would shift the burden to
the insurer to prove that the policyholder would not have
purchased the higher amount. While the solution is not perfect,
I believe that it is the best available remedy.14
Because I believe that a meaningful offer under AS
21.89.020(c) must include some information about the price of UIM
coverage, I respectfully dissent.
_______________________________
1 370 P.2d 519, 524-25 (Alaska 1962) (footnotes omitted).
2 We also granted Graham-Gonzalezs cross-petition for
review from the courts rejection of her suggested remedy for
violation of subsection .020(c). She contended that the highest
statutorily mandated optional limits ($1,000,000/$2,000,000)
should be automatically imposed. The cross-petition is mooted by
our conclusion that subsection .020(c) was not violated.
3 AS 21.89.020(c) and (e) provide:
(c) An insurance company offering
automobile liability insurance in this state
for bodily injury or death shall, initially
and at each renewal, offer coverage
prescribed in AS 28.20.440 and 28.20.445 or
AS 28.22 for the protection of the persons
insured under the policy who are legally
entitled to recover damages for bodily injury
or death from owners or operators of
uninsured or underinsured motor vehicles.
The limit written may not be less than the
limit in AS 28.20.440 or AS 28.22.101.
Coverage required to be offered under this
section must include the following options:
(1) policy limits equal to the limits
voluntarily purchased to cover the liability
of the person insured for bodily injury or
death; . . .
(2) except when the coverage consists of
motorcycle liability insurance, and except
for a named insured required to file proof of
financial responsibility under AS 28.20 or an
applicant required to file proof of financial
responsibility under AS 28.20, policy limits
in the following amounts when these limits
are greater than those offered under (1) of
this subsection:
(A) $100,000 because of bodily injury to
or death of one person in one accident, and,
subject to the same limit for one person,
$300,000 because of bodily injury to or death
of two or more persons in one accident;
(B) $300,000 because of bodily injury to
or death of one person in one accident, and,
subject to the same limit for one person,
$500,000 because of bodily injury to or death
of two or more persons in one accident;
(C) $500,000 because of bodily injury to
or death of one person in one accident, and,
subject to the same limit for one person,
$500,000 because of bodily injury to or death
of two or more persons in one accident;
(D) $500,000 because of bodily injury to
or death of one person in one accident, and,
subject to the same limit for one person,
$1,000,000 because of bodily injury to or
death of two or more persons in one accident;
(E) $1,000,000 because of bodily injury
to or death of one person in one accident,
and, subject to the same limit for one
person, $2,000,000 because of bodily injury
to or death of two or more persons in one
accident;
(3) other policy limits at the option of
the insurer.
. . . .
(e) The coverage required under (c) and
(d) of this section may be waived in writing
by the insured in whole or in part. After
selection of the limits by the insured or the
exercise of the option to waive the coverage
in whole or in part, the insurer is not
required to notify any policy holder in any
renewal, supplemental, or replacement policy,
as to the availability of the coverage or
optional limits, and the waived coverage may
not be included in any renewal, supplemental,
or replacement policy. The insured may, at
any time, make a written request for
additional coverage or coverage more
extensive than that provided on a prior
policy.
4 Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783,
787-88 (Alaska 1996) (citations omitted).
5 22 P.3d 481, 491 (Alaska 2001).
6 See Websters Third New International Dictionary 1566
(1969). Following the quoted definition the dictionary states:
esp: to place (merchandise) on sale <~s a range of cameras at
reasonable prices>.
7 Peter, 22 P.3d at 491 (emphasis added).
8 Minutes, House Judiciary Comm. Hearings on HB 429
(April 9, 1990) (testimony of Stan Darlington).
9 Minutes, House Labor and Comm. Hearings on HB 429
(February 6, 1990) (testimony of Jay Frank).
10 Id.
11 The approvals were issued in 2002. GEICO also
submitted similar forms that were approved by the Division of
Insurance for Progressive Insurance Company in 1995, 1999, and
2002.
12 DeNuptiis v. Unocal Corp., 63 P.3d 272, 277 (Alaska
2003). See also Lakosh v. Alaska Dept of Envtl. Conservation, 49
P.3d 1111, 1114 (Alaska 2002).
13 See McTaggart v. Liberty Mut. Ins., 983 P.2d 853, 857-
58 (Kan. 1999).
14 Diaz v. Silver Bay Logging, Inc., 55 P.3d 732, 741
(Alaska 2002) (quoting Fairbanks N. Star Borough Sch. Dist. v.
NEA-Alaska. Inc., 817 P.2d 923, 925 (Alaska 1991)).
15 The question presented is one that has received
considerable attention, both in Alaska and in other
jurisdictions. In addition to superior court rulings in the
cases now before us, another Alaska superior court judge has
ruled that the use of a selection form similar to that used by
GEICO and State Farm constituted a proper offer as required by AS
21.89.020(c). Moore v. Progressive Specialty Ins. Co., No. 3AN-
99-11321 Ci. (Alaska Super., March 4, 2002). The United States
District Court for the District of Alaska has ruled that nothing
in the statutory language nor in Alaska case law require[s] that
an insurer state the corresponding premiums to fulfill its
obligation to offer UIM coverage. Cruz v. Progressive
Northwestern Ins. Co., No. A-01-40 Cv. (U.S. Dist. Ct., May 16,
2002).
In other jurisdictions there are similar differences of
opinion. The lead case for inclusion of premium information is
Hastings v. United Pacific Ins. Co., 318 N.W.2d 849, 853
(Minn.1982) (in order to comply with statutory offer requirement
the insurer must communicate to the insured that optional
coverages are available for a relatively modest increase in
premiums). Notwithstanding that the Minnesota legislature
repealed Minn. Stat. 65B.49, subd. 6(e), upon which Hastings
relies, some other jurisdictions have followed Hastings. See
Mollena v. Firemans Fund Ins. Co. of Hawaii, Inc., 816 P.2d 968,
971-72 (Haw. 1991); Linko v. Indemn. Ins. Co. of N. Am., 739
N.E.2d 338, 342 (Ohio 2000); State Farm Mut. Auto. Ins. Co. v.
Wannamaker, 354 S.E.2d 555, 556-57 (S.C. 1987). Other
jurisdictions have ruled that premium information need not be
stated. See Tallent v. Natl Gen. Ins. Co., 915 P.2d 665, 667
(Ariz. 1996); Libby v. Govt Employees Ins. Co., 558 A.2d 1236,
1240 (Md. App. 1989); and Beck v. Powell, 832 P.2d 1254, 1257
(Or. App. 1992).
1 22 P.3d 481, 491 (Alaska 2001).
2 See Mollena v. Firemans Fund Ins. Co. of Haw., Inc.,
816 P.2d 968, 972 (Haw. 1991) (applying the four-part test from
Hastings, below); Cloninger v. Natl Gen. Ins. Co., 488 N.E.2d
548, 551 (Ill. 1985) (same), superseded by statute, see DeGrand
v. Motors Ins. Corp., 588 N.E.2d 1074, 1077 (Ill. 1992); Hastings
v. United Pac. Ins. Co., 318 N.W.2d 849, 853 (Minn. 1982)
(construing a statute that was repealed in 1980 and requiring
that the offer (1) be commercially reasonable, (2) specify the
limits of optional coverages, (3) apprise the insured of the
nature of the optional coverage, and (4) notify the insured that
optional UIM coverage is available for only a small additional
charge); Linko v. Indem. Ins. Co. of N. Am., 739 N.E.2d 338, 342
(Ohio 2000); State Farm Mut. Auto. Ins. Co. v. Wannamaker, 354
S.E.2d 555, 556 (S.C. 1987) (adopting the four-part test from
Hastings); but see Tallent v. Nat. Gen. Ins. Co., 915 P.2d 665,
667 (Ariz. 1996); Libby v. Govt Employees Ins. Co., 558 A.2d
1236, 1240 (Md. App. 1989); Beck v. Powell, 832 P.2d 1254, 1257
(Or. App. 1992).
3 Hastings, 318 N.W.2d at 853.
4 See cases cited supra note 2.
5 See Hastings, 318 N.W.2d at 852; Kuchenmeister v. Ill.
Farmers Ins. Co., 310 N.W.2d 86, 88 (Minn. 1981); Linko, 739
N.E.2d at 342; Wannamaker, 354 S.E.2d at 557.
6 22 P.3d at 489.
7 Id. (quoting AS 28.20.010).
8 AS 28.22.011.
9 Order Granting Partial Summary Judgment, Case No. 3AN-
00-12188 CI (Alaska Super., Aug. 8, 2002).
10 Id.
11 See Cloninger, 488 N.E.2d at 551; Hastings, 318 N.W.2d
at 853; Wannamaker, 354 S.E.2d at 556.
12 22 P.3d at 484.
13 Id. at 491.
14 Some courts have employed a remedy that provides the
policyholder with coverage equal to the insureds liability policy
or the statutory minimum. See, e.g., Mollena, 816 P.2d at 974.
I believe this remedy could shortchange some consumers who would
have purchased additional UIM coverage. On the other hand, a
remedy that automatically grants policyholders the maximum
coverage amount or that treats the offer as left open would
present some policyholders with a windfall they would not
otherwise have acquired.
