Insurers Respond to Maine Uninsured Motorist Coverage Report

December 13, 2005

Maine’s Bureau of Insurance has characterized legislation drafted by the National Association of Mutual Insurance Companies to correct a state Supreme Judicial Court decision regarding mandated uninsured motorist coverage as the most “straightforward” approach in a recent report.

However, the bureau refrained from offering any recommendation in its November report on the legal and policy implications of the court decision in Butterfield v. Norfolk & Dedham Mut. Fire Ins. Co.

“While we are disappointed that the bureau did not go so far as to recommend that legislators adopt the NAMIC-drafted proposal, we are encouraged by the fact that the proposal was recognized as an appropriate way to correct the decision,” said Northeast Region State Affairs Manager Paul Tetrault.

In the Butterfield decision, the court allowed a decedent’s father to recover under the uninsured motorist coverage of his policy even though the policy limited UM coverage to bodily injury sustained by an insured and the decedent did not quality as an insured under the policy because she did not live with her father. The court held that the insurer could not limit statutorily mandated UM coverage in this way.

NAMIC drafted a bill to correct the decision by inserting language into Maine’s UM statute that would limit coverage to injury sustained by an insured person, and provided testimony in support of the proposal. Rather than taking action on the merits of the proposal, however, the Insurance and Financial Services Committee ordered the bureau to conduct a study on the decision and its impact.

The bureau’s report contains a review of Maine’s UM statute, a discussion of the Butterfield case, and a summary of findings based on input from industry members. While failing to offer a recommendation on whether the legislation should be enacted, the Bureau’s report does discuss the concern of insurers that unless coverage is limited to injury sustained by an insured, insurers would have no way to assess and underwrite the exposure.

The bureau report acknowledges that it does not “identify a clear approach to recommend” to the Insurance Committee but suggests its summary and analysis may nevertheless be helpful to the committee as it engages in policy discussions. The report suggests that if the committee chooses to amend the UM statute, “perhaps the most straightforward approach” would be to adopt NAMIC’s proposal provided in LD-122 of simply inserting the phrase “sustained by an insured person.”

“The NAMIC-drafted proposal is a simple and sensible corrective measure that should be adopted,” said Tetrault. “NAMIC will advocate strongly for its adoption during the 2006 legislative session.”

Source: NAMIC

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