There have been attacks on UIM policies for years, with plaintiffs trying to obtain judicial rulings to increase payments under such policies. In 2019, the Idaho Supreme Court discussed UIM policies, and found that there were two types of coverage: “excess” and “difference in limits,” sometimes called “offset” coverage. Wood v. Farmers Ins. Co. of Idaho, 166 Idaho 43, 46, 454 P.3d 1126, 1129 (2019). However, insurers should be aware of the impact of both Pena v. Viking and SB 1269 on UIM coverage.
WOOD V. FARMERS INS. CO. OF IDAHO
In Wood, the issue involved an insured who was injured in an auto collision with an at-fault driver who had $100,000.00 of liability coverage. The insured had $100,000.00 in UIM coverage under an “offset” policy, meaning that there was no additional coverage. The Idaho Supreme Court found that offset policies did not violate Idaho public policy, and upheld dismissal of the insured’s claims against Farmers. However, while Wood seemed to indicate that both offset and excess UIM coverage are valid in Idaho, such conclusion was short-lived.
PENA V. VIKING
In February 2022, the Idaho Supreme Court issued a ruling in Pena v. Viking (this case is not yet published and does not yet have a case number). In Pena, the insured was injured in a motor vehicle accident where the at-fault driver had the state minimum of $25,000 in liability coverage. The insured had an “offset” UIM policy with $25,000 in coverage. Relying on Wood, the insurer paid only the amounts owed under the medical care coverage and refused to pay any additional amount under UIM coverage, as it was all offset. The Supreme Court found that under circumstances where the tortfeasor has minimum limits, and the insured has an offset UIM policy with $25,000 limits, the UIM coverage would be illusory because there are no set of circumstances under which payment could be made under the UIM policy. The Court disregarded arguments involving situations where the tortfeasor might be insured with minimum limits from other states that are less than Idaho’s limit (e.g., California has a minimum liability amount of $15,000).
As a result of Pena, it can be assumed that a full-scale attack is likely to be launched against UIM policies in the future. The Idaho Supreme Court tried to clarify that Wood was still good law because it was not a situation where state minimums were involved. Based on this, it can be presumed that any offset UIM policy with limits in excess of the statutory minimum is still valid. Further, neither Wood nor Pena appear to address “excess” UIM policies at all. Despite that, it is likely that additional public policy-based arguments can be expected in the near future for UIM claims.
IDAHO SENATE BILL 1269
However, this situation may be mooted by potential legislation. The Idaho legislature is reviewing a bill that may require all UIM policies to be “excess” policies. Idaho Senate Bill 1269 (information can be found about it at https://legislature.idaho.gov/sessioninfo/2022/legislation/S1269/) proposes to add the following language to Idaho Code § 41-2503:
With respect to policies issued or renewed on or after January 1, 2023, “underinsured motor vehicle coverage” means excess coverage in addition to the insufficient coverage of the tortfeasor, and such underinsured motor vehicle coverage limits may not be reduced by amounts paid by the tortfeasor’s coverage or any other coverage. The covered insured may not recover from the available underinsured motor vehicle policy or policies an amount greater than the total legal liability of the tortfeasor or the applicable limits of the underinsured coverage or coverages, whichever is less. This subsection shall not apply with respect to motor vehicle insurance policies in effect before January 1, 2023. The department of insurance is authorized to promulgate rules to implement and enforce the provisions of this subsection.
This language, should it be made into law, will likely require all UIM coverage to be excess, and all “offset” policies will be subject to attack on the grounds such policies are invalid against public policy. This bill has not yet been brought to committee, and it is not currently on the agenda, though it could be brought any time in the next few weeks.
Please contact a Gjording Fouser lawyer at 208.336.9777 if you would like any additional information about this topic or any other issues facing your company.