389_C049

AGENT FAILS TO EXPLAIN LOWER UIM LIMITS

Mary Beth Beckman was injured in a collision with a car driven by Arthur Riddle. His policy limits were $25,000 per person and $50,000 per accident.

Jeffrey and Mary Beth Beckman had a policy issued by Prudential which covered four vehicles owned by them, including the Astro van involved in the accident. Their policy provided bodily injury limits of $100,000 and $300,000 per accident and also underinsured motorists limits of $15,000 per person and $30,000 for each accident.

After the accident, the Beckmans contended that the company should be liable for underinsured motorist limits equal to the limits of the policy. They sought damages for Mary Beth's injuries, as well as loss of consortium by her husband. The company was charged with negligence of David Henry, its agent, since he recommended the insureds elect UIM coverage in amounts less than that required by Ohio law.

Prudential relied upon the application signed only by Jeffrey Beckman which showed he had elected the lower UIM limits of $15,000/$30,000. It provided that its UIM insurance did not apply since Riddle's policy limits were in excess of Beckman's policy. The company denied any negligence on the part of its agent and asserted Mr. Beckman's contributory negligence.

The Ohio statute requires that all policies issued in that state provide UIM coverage in the same amount as liability limits, unless it is rejected by the named insured or a lesser amount is elected by the named insured.

While Mary Beth was covered by the policy, the election for lower UIM limits was not signed by her, and Jeffrey's name only was shown as named insured on the declaration page.

However, as to the charge of negligence, the court noted that David Henry was an exclusive agent for Prudential, and he had taken care of all of the Beckmans' insurance needs for years. They relied upon his ability to keep them protected.

In 1987, for economic reasons, the insureds changed to State Farm, but in 1990, Jeffrey brought that policy to Henry for review. Henry advised that he could save the insureds about $90 by going back to Prudential. It was shown that $28 of this was because of the reduction of UIM coverage, but this was not explained to Jeffrey.

Jeffrey testified that Henry had put the forms before him and showed him where to sign, and Henry admitted he had filled in the election form and placed an "X" where Jeffrey was to sign. Jeffrey admitted he did not read the form.

David Henry testified that he did not explain to the Beckmans that he was reducing underinsured motorist limits, and, in fact, he said he did not know that Prudential sold that coverage in Ohio. Jeffrey believed he would have the same coverage they had under the State Farm policy, which had limits equal to the liability coverage.

The court decided that David Henry did not know the policy he was selling. The court found that an agent selling auto insurance has a duty to explain UIM coverage, as well as explain the consequences of insufficient limits.

It concluded that had it not been for the negligence of the company and its agent, the Beckmans would have purchased UIM coverage in the same amount as their liability coverage, $l00,000/$300,000.

While both Beckmans were present when David Henry made his presentation, neither one of them read the policy and only Jeffrey was asked to sign the application and election.

In holding Prudential and its agent responsible, the court said a damage award could not be entered until the Beckmans had secured a judgment against Riddle in excess of his limit of $25,000. At that time, damages, if any, would be awarded as though the Beckmans had underinsured motorists coverage equal to their liability limits.

Beckman v. Prudential Insurance Company et al--No. CV93-03-0412--Court of Common Pleas of Ohio, Butler County--December 21, 1994--647 North Eastern Reporter 2d 884.