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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 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.