Excess & Umbrella Insurers Beware!

In a landmark decision, the Georgia Court of Appeals ruled last week that excess and umbrella insurance companies are required to provide uninsured/underinsured motorist coverage unless the insured has specifically rejected the coverage – even if the policy contains a provision excluding such coverage.  See, Abrahams v. Atlantic Mut. Ins. Agency, A06A1501 (08/31/2006).  The Court held that Georgia’s uninsured motorist statute, O.C.G.A. 33-7-11, requires all insurers who provided motor vehicle liability coverage – even excess or umbrella insurance – to offer uninsured/underinsured motorist coverage.

 

And, the bad news for the insurance companies didn’t stop there.  The Court went even further, stating that unless the insured specifically rejected coverage in writing or chose lower limits, the amount of coverage would be the same as the policy limits.  Given that most excess and umbrella policies are written for at least a million dollars, and it is unlikely that many, if any, excess carriers have ever offered UM coverage in Georgia, the insurance industry could be on the hook for millions of dollars for a risk they thought they had excluded.

Arguably, this decision could be viewed as “unfair” to the insurance companies as most of their policy holders were made aware (if they closely read their policies) that no such coverage was included.  However, the Court determined that the UM statute is crystal clear that these companies had an obligation to at least offer the coverage and let their insureds choose whether to reject.  The insurance companies had an opportunity to collect the premiums for additional coverage – now they will be providing UM coverage for free.