Government Employees Insurance Co. v. Graham-Gonzalez

FABE, Justice,

with whom BRYNER, Chief Justice, joins, dissenting.

I disagree with the court’s 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*288some 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 Legislature’s 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 legislature’s 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, illus*289trates 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(e) 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 Sanders’s 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 Legislature’s decision to keep the “shall offer” language in the statute. In the years preceding the Alaska Legislature’s 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 Farm’s 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 Graharrir-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 policy’s limits had the additional coverage been offered.

This remedy requires a two-fold reading of AS 21.89.020(e). Under AS 21.89.020(c)(1), insurance companies must offer UIM coverage with policy limits equal to the limits voluntarily purchased under the insured’s 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(e) 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/ *290$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 Sanders’s 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(e) must include some information about the price of UIM coverage, I respectfully dissent.

. 22 P.3d 481, 491 (Alaska 2001).

. See Mollena v. Fireman's Fund Ins. Co. of Haw., Inc., 72 Haw. 314, 816 P.2d 968, 972 (1991) (applying the four-part test from Hastings, below); Cloninger v. Nat'l Gen. Ins. Co., 109 Ill.2d 419, 94 Ill.Dec. 549, 488 N.E.2d 548, 551 (1985) (same), superseded by statute, see DeGrand v. Motors Ins. Corp., 146 Ill.2d 521, 167 Ill.Dec. 944, 588 N.E.2d 1074, 1077 (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., 90 Ohio St.3d 445, 739 N.E.2d 338, 342 (Ohio 2000); State Farm Mnt. Auto. Ins. Co. v. Wannamaker, 291 S.C. 518, 354 S.E.2d 555, 556 (1987) (adopting the four-part test from Hastings); but see Tallent v. Nat. Gen. Ins. Co., 185 Ariz. 266, 915 P.2d 665, 667 (1996); Libby v. Gov’t Employees Ins. Co., 79 Md.App. 717, 558 A.2d 1236, 1240 (1989); Beck v. Powell, 113 Or.App. 318, 832 P.2d 1254, 1257 (1992).

. Hastings, 318 N.W.2d at 853.

. See cases cited supra note 2.

. 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.

. 22 P.3d at 489.

. Id. (quoting AS 28.20.010).

. AS 28.22.011.

. Order Granting Partial Summary Judgment, Case No. 3AN-00-12188 Cl (Alaska Super., Aug. 8, 2002).

. Id.

. See Cloninger, 94 Ill.Dec. 549, 488 N.E.2d at 551; Hastings, 318 N.W.2d at 853; Wannamaker, 354 S.E.2d at 556.

. 22 P.3d at 484.

. Id. at 491.

. Some courts have employed a remedy that provides the policyholder with coverage equal to the insured's 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.