The judges of the Third Circuit Court of Appeals ruled that the insured’s waiver of higher UM/UIM limits on a policy still applies after the insurer transfers that policy to its subsidiary. The case is Selective Ins. Co. of Am. v. Novitsky, 796 Fed. Appx. 100 (3rd Cir. 2020). Please note that this case is not a precedential opinion under Third Circuit Internal Operating Procedure Rule 5.7.and is not a binding precedent on the court.
The Policy Transfer
Village Auto Sales purchased an auto policy from Selective Insurance Company of South Carolina (Selective of South Carolina). The president of Village Auto, Robyn Novitsky, signed a UM/UIM form requesting only $35,000 in UM/UIM coverage, rather than the $1 million Selective of South Carolina was obligated to offer. Mrs. Novitsky also signed a notice stating she understood the potential consequences of a lower UM/UIM limit and acknowledged that her election of lower UM/UIM limits would not change unless she requested otherwise.
Ten years later, Selective of South Carolina notified the Novitskys that the Village Auto policy was being transferred to one of its affiliates, Selective Insurance Company of America (Selective-America). The notice of transfer informed the Novitskys that their policy number, coverage, and premium would not change as a result of the transfer, and there would not be a gap between the policy periods.
A few years after the policy transfer, Mr. Novitsky and his son were driving a company vehicle when they both died in a multi-vehicle collision. The at-fault driver’s carrier paid almost $790,000 to Mrs. Novitsky and her son’s widow. These damages did not make the Novitskys “whole,” so they filed a claim under the Village Auto policy for $1 million in UM/UIM coverage. Selective-America countered that the UM/UIM limit on the policy was still $35,000 based on the waiver Mrs. Novitsky had signed for the prior policy.
Disagreement Over UM/UIM Limit
Selective-America asked the court to make a determination regarding the amount of coverage due to Mrs. Novitsky and her daughter-in-law. Both parties filed for summary judgment. The District Court ruled in favor of Selective-America, finding that the waiver was still attached to the Village Auto policy after it was transferred from Selective of South Carolina to Selective-America. The Novitskys appealed.
Pennsylvania law requires companies to provide equal amounts of UM/UIM and bodily injury coverage. However, policyholders may opt for lower UM/UIM limits or reject the coverage outright so long as the request or rejection is made in writing. This offering of equal coverage must be made whenever a new insurance policy is issued.
The Novitskys argued that Mrs. Novitsky’s request for $35,000 of UM/UIM coverage rather than $1 million should not have stayed with the Village Auto policy when it was transferred to Selective-America. The transfer of the Village Auto policy, they claimed, created a new policy that obligated Selective-America to obtain a new waiver for the $1 million UM/UIM limit; Selective-America had not obtained such a waiver, and therefore the Novitskys were entitled to the full $1 million of UM/UIM coverage. Selective-America argued that, with the exception of which company provided coverage, the Novitsky’s policy after the transfer was identical to their policy before the transfer.
What the Third Circuit Said
The judges of the Third Circuit looked to a similar case that had been decided by a Pennsylvania state court, Breuninger v. Pennland Insurance Company, 675 A.2d 353 (Pa. Super. Ct. 1996). The insured in Breuninger, like the Novitskys, argued the waiver of higher UM/UIM limits given on an earlier policy did not survive a policy transfer because the transfer itself created a new policy that required the insurer to execute a new waiver of higher UM/UIM limits. The Breuninger judges were not convinced. They pointed out that the policy number, coverage, and premium on the post-transfer policy were identical to those on the prior policy. They also noted that the policyholder “never objected to the transfer and kept making payments” to the “new” insurer, who was an affiliate of company that had issued the prior policy. They ruled the UM/UIM waiver on the former policy remained a part of it after the transfer.
The court compared the facts of Breuninger to the facts in the present case: The terms and conditions of the Novitsky’s “new” policy were identical to those of the “old” policy. The Novitskys had the same agent, policy number, and coverage; the only change was which insurer’s name was on the policy. Even then, the “new” insurer was a subsidiary of the former insurer.
The judges held that Mrs. Novitsky’s waiver of higher UM/UIM limits on Village Auto’s earlier policy was still valid regarding the “new” policy with the affiliate. Judgment in favor of Selective-America was affirmed.
Editor’s Note: The court opinion stated that, in this case, “the transfer between insurers acted as a renewal of the same policy, rather than an issuance of a new policy” (emphasis added). However, it is important to consider the context of this statement: coverage under the pre-transfer and post-transfer policies was identical, and the new company was a subsidiary of the first company. The Novitskys did not need to consider a new policy limit or debate the applicability of a new exclusion. They didn’t need to sign off on a premium that was higher or lower than the one on their former policy. Had there been such a change to the policy, this case might have ended differently.
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