Utah Supreme Court
When must insurers obtain waivers for reduced underinsured motorist coverage? Iverson v. State Farm Explained
Summary
Carter and Glenada Iverson were killed in a collision with an underinsured motorist, and State Farm offered $20,000 in UIM coverage despite $50,000/$100,000 liability limits. The federal district court certified the question of whether providing lower UIM limits than liability limits complies with Utah’s UIM statute.
Analysis
In Iverson v. State Farm, the Utah Supreme Court addressed a certified question about when insurers must obtain written waivers before providing underinsured motorist (UIM) coverage below liability policy limits under Utah’s UIM statute.
Background and Facts
Carter and Glenada Iverson maintained insurance with State Farm for over twenty years, with multiple policy changes including vehicle additions, policy number updates, and premium adjustments. In July 2005, both were killed in a collision with an underinsured motorist. While their policy provided $50,000/$100,000 in liability coverage, State Farm offered only $20,000 in UIM benefits. State Farm never obtained a written waiver authorizing lower UIM limits.
Key Legal Issues
The central issue was whether changes to the Iversons’ policy after January 1, 2001, created a “new policy” under Utah Code section 31A-22-305(9), which would require State Farm to obtain a written waiver before providing UIM coverage below liability limits. The court also had to define what constitutes a “new policy” under the statute.
Court’s Analysis and Holding
The court held that a “new policy” exists when insurers enter new contractual relationships or make material changes to existing policies that alter the risk relationship between insurer and insured. The court established a three-factor test for materiality: (1) whether changes were requested by the insured or were routine/ministerial, (2) whether the average insured would want to reevaluate risk tolerance, and (3) whether changes would lead the average insured to believe they received a new policy.
Practice Implications
This decision clarifies that insurers cannot avoid consumer notification requirements simply by maintaining the same policy relationship over time. The materiality analysis requires case-specific examination of policy changes rather than categorical determinations. Practitioners should carefully analyze the totality of circumstances when determining whether policy modifications trigger waiver requirements under the UIM statute.
Case Details
Case Name
Iverson v. State Farm
Citation
2011 UT 34
Court
Utah Supreme Court
Case Number
No. 20081016
Date Decided
July 1, 2011
Outcome
N/A – Certified Question Answered
Holding
An insurer may provide lower UIM coverage than liability coverage if it complies with consumer notification requirements, which differ based on whether a ‘new policy’ exists on or after January 1, 2001, and a ‘new policy’ includes both new contractual relationships and material changes that alter the risk relationship between insurer and insured.
Standard of Review
Not applicable – certified question from federal district court presents legal questions without a decision to affirm or reverse
Practice Tip
When analyzing UIM coverage disputes, examine whether policy changes after January 1, 2001 were material enough to alter the risk relationship and trigger waiver requirements under the three-factor test.
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