Background
Katherine Royce purchased a $1 million personal-liability umbrella policy from State Farm in October 2000. She signed an application rejecting uninsured and underinsured motorist coverage, with language stating that the rejection would apply to the policy, future renewals, and replacement policies until she requested the coverage in writing.
After renewing the policy in October 2001, Katherine requested and received a $4 million increase in liability coverage, bringing the umbrella limit to $5 million. She did not execute another UIM rejection. In 2021, her sister, Susan D. Royce, was seriously injured while riding in Katherine’s insured vehicle and, after settling with the underinsured driver, sought UIM benefits under the umbrella policy. State Farm denied coverage, and the superior court granted summary judgment to State Farm.
The Court’s Holding
The New Hampshire Supreme Court reversed and remanded. Applying the 1991 version of RSA 264:15, I, the court held that Katherine’s requested $4 million increase was an election to purchase additional liability insurance. That purchase triggered the statute’s requirement that an umbrella policy provide UIM coverage equal to the liability coverage purchased unless the named insured rejected it.
Because Katherine did not reject UIM coverage when she purchased the additional $4 million in protection, the policy provided $4 million in UIM coverage at the time of Susan’s accident. The original waiver remained effective, however, as to the initial $1 million limit because routine renewals merely continued that coverage and did not constitute new elections to purchase insurance. The court therefore directed entry of a declaratory judgment consistent with $4 million—not $5 million—in UIM coverage.
Key Takeaways
- A substantial increase in an umbrella policy’s liability limit constituted a purchase of additional insurance under the applicable version of RSA 264:15, I.
- The insured’s original UIM rejection did not waive coverage for the later $4 million increase because she did not reject UIM coverage when purchasing that additional protection.
- Routine renewals did not trigger a new UIM-coverage election, so the original rejection remained effective for the policy’s initial $1 million limit.
Why It Matters
The decision distinguishes between merely renewing existing umbrella coverage and affirmatively purchasing additional limits. Under the 1991 statute governing this policy, insurers could not rely on broadly worded application language to extend a prior UIM waiver to a later purchase of additional liability coverage when doing so would conflict with the statutory mandate.
The ruling also limits the insured’s recovery to the newly purchased layer: the court recognized $4 million in UIM coverage while leaving the waiver intact for the original $1 million.