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1. State Farm Mut. Auto Ins. v. Fortin, 350 N.C. 264 (1999)

In Fortin, the named insured executed a Rate Bureau selection/rejection form several months before the effective date of the 1991 amendments to N.C. Gen. Stat. § 20-279.21(b)(4), rejecting combined UM/UIM coverage and selecting only UM coverage. When the policy was renewed in January, 1992, the insurer again sent the named insured its version of the newly approved Rate Bureau Form, which was executed by the named insured. UIM coverage was again rejected. The insurer’s version of this second form simply contained an additional two sentences not present on the approved Rate Bureau form, which stated “If you wish to make a change or select other limits contact your State Farm Agent. YOUR CURRENT U LIMITS ARE $100,000/$300,000”.

The North Carolina Supreme Court held in Fortin that the named insured’s rejection of UM/UIM coverage before the effective date of the statutory amendments was no longer valid after that date, and that, because of the two additional sentences present on the second form, the second form was not a “form promulgated by the Rate Bureau and approved by the Commissioner of Insurance” as required by the statute. The Court, in making this determination, found that there was not a valid rejection of UIM coverage under

the facts of that case. In short, the Court had to first conclude that the insured was provided the option; otherwise, the rejection could not have been held to have been invalid.

Outlining the issue that was before the Court in Fortin, the opinion stated:

In a case of first impression before this Court, we must decide whether there was a valid rejection of underinsured motorist (UIM) coverage for a renewal of a personal auto policy issued subsequent to the effective date of the 1991 amendments to N.C.G.S. § 20- 279.21(b)(4), the UIM provision of the Motor Vehicle Safety and Financial Responsibility Act (the Act).

Fortin at 265 (emphasis added).

The issue before this Court, whether the State Farm policy provides UIM coverage to defendants, is dependent upon whether there was a valid rejection of UIM coverage by Bruce Fortin for a renewal of the policy subsequent to 5 November 1991, the effective date of the 1991 amendments to N.C.G.S. § 20-279.21(b)(4). Absent a valid rejection, a policy that includes UM coverage and contains bodily injury liability limits exceeding the statutory minimums must provide UIM coverage. […] We conclude that there was no valid rejection of UIM coverage in this case.

Id. at 267 (emphasis added).

In Fortin, State Farm provided Mr. Fortin with the option to select or to reject UM and UIM coverage, not once, but twice. Fortin does not stand for the proposition that an improper form

leading to an invalid rejection is the same as no offer leading to no opportunity to select or to reject UIM coverage.

The point of Fortin is that if an insurer provides to its insured an option to select or reject UIM coverage, although flawed in some manner, and the insured rejects coverage, it follows that the rejection is invalid and UIM coverage is deemed to be equal to the highest bodily injury liability limits available under the policy. In Fortin, there was a clear indication, as evidenced by the completed form, that the named insured intended to reject UIM coverage altogether. Despite this, the Court held that the insured was entitled to UIM coverage equal to the highest limit of bodily injury liability coverage available under the policy (e.g.($100,000.00)), which furthered the principles of the Financial Responsibility Act. Fortin, therefore, sets a statutory “floor” for coverage when an improper form is offered to an insured and when the rejection is invalid. On the other hand, Fortin does not set the “ceiling” when the insurer makes no effort to fulfill its statutorily mandated obligation to provide the insured with the options for UIM coverage.

2. Metropolitan Property and Casualty Ins. Co. v. Caviness, 124 N.C. App. 760 (1996) (Pre-curser to Williams)

In Caviness, as in this case, no option was ever given to the named insured to select or reject his UIM coverage limits. The Caviness court held that the insured was entitled to the maximum amount of UIM insurance available by law, which was $1,000,000 per person $1,000,000 per accident, under the 1991 version of the UIM statute. Indeed, the Court stated “[a]s codified… the 1991 statute is inherently ambiguous regarding the amount of UIM coverage to accord an insured absent a selection or rejection of such coverage. Put simply, when, as here, an insured fails to

select or reject UIM coverage, the 1991 statute provides no more than a range of possible coverage limits—not less than liability coverage but no more than one million dollars.”

The Caviness decision did not deal with the 1992 amendment to the statute, but it clearly provides the framework, which is in accord with the pole-star insurance principles outlined above, that ambiguities with regard to coverage are to be construed in favor of fullest possible protection to innocent victims of automobile accidents.

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