When is UM Rejection Rule Met?

This week, the Court held that the statu­tory requirement of T.C.A. 56-7-1201(a)(2) for a written rejection of uninsured/underinsured motorist benefits, or a se­lection of benefits lower than liability limits is met when the insured signs an application listing the separate, but lower, limits without actually initialing a block stating that purpose.

Here was the real life example. The in­sured was provided with the insurance Application to review and sign. The first page of the Application listed “Li­ability” coverage limit as $1,000,000 and the “Uninsured Motorist” coverage limit as $60,000. On the third page of the Application, the insured was given three choices, which were 1) selecting the UM BI limits indicated in the ap­plication, 2) selecting UM BI and PD coverage in its entirety, or 3) selecting only UM PD in its entirety. The insured signed the Application, but he neglect­ed to select any of the three choices re­garding UM insurance.

The question before the court was whether the statutory requirement of rejection of UM limits was met without additional proof of intent to reject the matching uninsured motorist coverage. The Court looked at the evidence in the record and the only evidence of intent was the insured’s signature on the Ap­plication. The law in Tennessee is well settled that the insured is presumed to have knowledge of the contract’s con­tents when he signs it. Therefore, if the insured fails to read the contract, he signs at his peril and may not later deny his obligation under the contract. The court held that the insured must suf­fer the consequences of his own negligence.

The court determined that the insured’s act of signing the Application which clearly listed the liability limits on the first page, was sufficient to meet the statutory requirements of rejecting or selecting lower UM limits.