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UIM Coverage - A Brief Look at Meaningful Offers and a Discovery Lesson

October 24, 2017

An automobile insurance carrier in South Carolina must offer underinsured motorist coverage (UIM), at the option of the insured, up to the limits of the insured liability coverage. If the insurer fails to make a meaningful offer of this coverage, the policy will be reformed, as a matter of law, to provide it. An insurer may establish a meaningful offer in two ways: the statutory presumption pursuant to S.C. Code §38-77-350(B) and the Wannamaker test. State Farm Mutual Automobile Insurance Co. v. Wannamaker. None of that is new. However, the ability to purchase coverage electronically is somewhat new, as are the issues attendant thereto. Our district court recently had an opportunity to take a look at electronically purchased coverage in Moultrie v. Progressive Direct Insurance Company, 2017 WL 4681999 (October 18, 2017). The court also had the opportunity to enforce a discovery lesson.

Moultrie purchased an automobile policy through the Progressive website when he bought a motorcycle. Less than a week after buying the motorcycle, and the coverage, Moultrie was seriously injured in a collision with an unknown driver. It was then he discovered the policy did not include UIM coverage. As a result, Moultrie filed an action seeking reformation of the policy, alleging Progressive failed to make a meaningful offer of UIM coverage. Progressive disagreed. The case was before the court on cross motions for summary judgment. Neither party adequately briefed the Wannamaker test; therefore, the court’s examination was limited to analysis of the statutory presumption.

In Moultrie, the court found a dispute of material fact whether Moultrie ever provided an electronic signature sufficient to establish a statutory presumption. The court’s method of reaching that conclusion is significant.

In support of his position, Moultrie submitted his deposition testimony that he did not complete the UIM form, an affidavit from an employee of the dealership through which the policy was purchased stating she did not electronically sign any documents on Moultrie’s behalf and a screenshot of the UIM provision that does not show his signature. Progressive contended, however, that the system through which the screenshot was taken was not a records archive – challenging its accuracy. Thus, a question of fact was established and Moultrie’s motion was denied.

The SC Supreme Court has held that an electronic signature rejecting optional UIM coverage triggers the statutory presumption of a meaningful offer. The court, however, refused to extend that holding to mean a prepopulated electronic signature equates to a meaningful offer. In its effort to convince the court it had Moultrie’s electronic signature, Progressive submitted the UIM offer form from its internal document retention system ostensibly showing Moultrie’s signature. It also provided a portion of its computer code showing an electronic signature. Yet, Progressive’s motion was also denied. Herein lies the discovery lesson. In the course of discovery, Progressive objected to a request for the production of its data, electronic files and screenshots relating to the policy and a meaningful offer of UIM coverage as not relevant. Because of Progressive’s objection on relevance and because it submitted the same purportedly irrelevant documents in support of its motion, Moultrie argued they should not be considered by the court. The court agreed. Finding Progressive’s refusal to disclose documents it used to support its motion for summary judgment was neither harmless or justified, as contemplated pursuant to Rule 37 of the Fed. R. Civ. P., the court refused to consider them, and therefore, denied Progressive’s motion.

The court reiterated that an electronic signature provided by the insured might suffice to establish a meaningful offer, while a prepopulated electronic signature may not. What Moultrie also shows us, however, is parties must approach discovery prudently. On the surface, it is difficult to understand Progressive’s refusal to produce its data, electronic files or screenshots relative to the policy and the UIM offer. As it turns out, it was a costly refusal.

Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.