In a major victory for Maine insurers, legislation drafted by the National Association of Mutual Insurance Companies (NAMIC) aimed at correcting a Maine Supreme Judicial Court decision hindering insurers’ ability to limit their exposure to certain uninsured motorist claims has been signed into law by Gov. John Baldacci.
The signing of the bill follows its passage in the House and Senate by wide margins. The bill (LD-2021) was approved 107-20 by the House and 24-11 by the Senate.
The legislation to allow insurers to limit uninsured motorist coverage to claims based on injuries sustained by insureds is a legislative response to the case of Butterfield v. Norfolk & Dedham, in which a majority of the Supreme Judicial Court held that a policy provision limiting coverage conflicted with the state’s UM statute. Under this holding, the father of a woman who was killed in an auto accident was able 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.
Two justices dissented, arguing that the policy limitation represented a reasonable and legally permissible means for an insurer to control its exposure to risk.
The industry sought a correction last year, but the initiative was challenged by intense lobbying from trial lawyers. As a result, the correction proposal was transformed into a resolution to have the issue studied by the Maine Bureau of Insurance between sessions. The resulting report recognized the dilemma faced by insurers seeking to assess their exposure but failed to offer a policy-based recommendation.
“Ultimately, lawmakers recognized the wisdom of the dissenters’ reasoning and saw that clarification of the UM statute’s intent is appropriate,” commented Paul Tetrault, NAMIC’s Northeast state affairs manager. “The change in the law recognizes what the dissenting judges recognized, that insurers have to be able to assess the exposure they take on when they write an insurance policy. Furthermore, it is consistent with the purpose and function of the UM statute, which is to provide insureds with first-party financial protection when they are involved in accidents with those who lack insurance coverage.”
According to Tetrault, passage of the Maine legislation is consistent with what has gone on in several other states where court decisions interpreting similar language and holding that coverage is mandated have been corrected by subsequent legislation. “In other states where this question is a live issue, we think that legislators should look to Maine as another example of appropriate corrective action,” he commented.
The summary of LD-2021 states in part that it “clarifies that an insurance policy may limit uninsured motorist coverage to the recovery of damages by an insured person under the policy for bodily injury, sickness or disease, including death, sustained by that insured person.”
Legislative passage of the bill is the result of efforts by industry representatives including the Maine Domestic Insurers Association, a NAMIC advocacy partner, to educate lawmakers that the coverage limitation is reasonable and consistent with the intent of the uninsured motorist statute.
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