Insureds in Grand Prairie, Arlington, Irving, Grapevine, Coppell, Keller, Saginaw, Lake Worth, Aledo, Hudson Oaks, Azle, Springtown, Burleson, Benbrook, and other places in Texas need to have an understanding of how Personal Injury Protection (PIP) and uninsured / underinsured (UM/UIM) benefits work in an automobile policy of insurance. Here is a case that gives some insight.
The case is styled, Old American County Mutual Fire Insurance Company v. Zeferino Sanchez. This is a 2004, case decided by the Texas Supreme Court.
Texas Insurance Code Sections, 1952.101 and 1952.152 provide that “any insured named in the policy” may reject UM/UIM and PIP coverages. The question in the case is – whether the insured spouse of the person listed as the “named insured” in the declarations page of a policy may reject those coverages.
The case is presented to the court on stipulated facts. On January 8, 1998, Margarita Sanchez, wife of Zeferino Sanchez, applied for and purchased an insurance policy from Old American for two of the couple’s vehicles. Ms. Sanchez rejected UM and PIP coverages on the insurance application, and Old American never assessed premiums for the coverages. In applying for the policy, Ms. Sanchez affirmed that the rejections of UM and PIP coverages would apply to the 1998 policy and to all future renewals of that policy. The Sanchezes renewed their existing policy in 1999. Neither Mr. or Mrs. Sanchez requested PIP or UM coverages at that time.
Although Ms. Sanchez’s name appeared on the 1998 policy application, she was not listed as a “named insured” on the declarations page. The policy, however, defined “you” and “your” to include the “named insured” as well as “the spouse if a resident of the same household.” Ms. Sanchez fell within the policy definitions of “you” and “your” because she and Mr. Sanchez lived in the same house at all pertinent times. To that end, the parties stipulated that both Mr. and Mrs. Sanchez were insured under the policy. The parties disagree, however, about the extent of the policy’s coverage. Specifically, the parties dispute whether Mr. Sanchez was entitled to UM and PIP benefits to cover damages arising from a 1999 accident.
On April 11, 1999, Mr. Sanchez’s 1984 Chevrolet pickup truck was parked on the shoulder of Interstate 35 in Hays County. A vehicle driven by an uninsured motorist struck Mr. Sanchez’s truck as he was lying beneath it repairing a broken fuel hose. The impact caused the pickup to collapse on Mr. Sanchez and sever his spinal cord. Although Mr. Sanchez owned the pickup truck at the time Ms. Sanchez applied for the policy, Ms. Sanchez did not identify the pickup in the application and it was not a “covered auto” under the policy. The policy’s UM and PIP provisions excluded coverage for injuries sustained while “occupying” or when “struck by” any vehicle owned by an insured that was not insured under the policy.
The parties did not dispute that Ms. Sanchez rejected UM and PIP coverages in writing; they do not assert that there were any formal defects with the manner or form of rejection; and they agree that premiums were never assessed for the coverages. The only issue was whether Ms. Sanchez had statutory authority to waive them. To resolve the issue, the court had to determine whether, under sections 1952.101 and 1952.152 of the Texas Insurance Code, the spouse of the person identified as the named insured in the declarations page of a policy may reject UM and PIP coverages.
This court then discussed at length the legislative history of the statutes and their purposes. They also discussed the ways other states dealt with this issue. At one point the court stated, “Finally, we note that interpreting ‘insured named in the policy’ to mean ‘named insured’ is consistent with the approach taken by other jurisdictions that have considered similar statutory language.”
In ruling in favor of the Old American, that the rejection by Ms. Sanchez was valid as to Mr. Sanchez, the court said, this conclusion is consistent with the breadth of authority Ms. Sanchez had in these transactions. It is undisputed that she was able to purchase the policy for her husband and herself, and she was covered under the policy to the same extent as her husband. “We find it difficult to conceive that the Legislature intended for a husband to be (i) covered under a policy obtained exclusively by his wife but admittedly for his benefit; (ii) entitled to recover from the insurer under the terms and policy limits set by the wife; yet, (iii) not bound with respect to one aspect of the policy — the rejection of UM and PIP coverages — because his wife was not authorized to reject coverages. Under this reasoning, the wife would not even be entitled to reject UM and PIP coverages on her own behalf. Based on the circumstances surrounding the enactment of … (the UM and PIP statutes), we conclude that the Legislature did not intend a meaning of “named insured” that would lead to this result; instead, the Legislature intended “named insured” to include the spouse of the individual named on the declarations page of an insurance policy.”
The court then held that the phrase “insured named in the policy” is synonymous with “named insured.” Because Ms. Sanchez can be classified as a “named insured” and thus an “insured named in the policy,” the court held that she had statutory authority to reject UM and PIP coverages.
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