Progressive Casualty Insurance Co. v. Estate of Palomera-Ruiz (5/20/2010)

May 26, 2010

Arizona Court of Appeals Division One Holds That An Electronic Recording of a Telephone Conversation Does Not Comply with the “Written Notice” Requirement in A.R.S. § 20-259.01.

In 2001, the owner of Giant Electric Corporation (“Giant”) purchased an auto insurance policy from Progressive Casualty Insurance Company (“Progressive”).  Progressive recorded the telephone call between Giant’s owner and its agent but did not send a separate written notice to giant offering to sell uninsured motorist (“UM”) and underinsured motorist (“UIM”) coverage to the company in an amount equal to Giant’s liability coverage.  Progressive also did not send a copy or transcript of the recorded telephone call to Giant. The policy Giant purchased provided $1,000,000 in liability coverage and UM/UIM limits in the amount of $100,000 per claim and $300,000 in the aggregate.  The policy was renewed throughout the years.

In 2006, a passenger in a Giant utility van driven by an individual insured through Giant’s policy suffered fatal injuries in an accident caused by an uninsured driver.  Progressive filed an action against the deceased’s estate, seeking a declaratory judgment that the policy’s UM/UIM limits were $100,000 per claim and $300,000 in the aggregate.  Progressive and the Estate filed cross-motions for summary judgment regarding whether Progressive failed to provide a written offer of UM/UIM coverage pursuant to A.R.S. § 20-259.01.  The superior court granted summary judgment in favor of the Estate and Progressive appealed. 

The Arizona Court of Appeals affirmed, holding that Progressive had not complied with A.R.S. § 20-259.01.  A.R.S. § 20-259.01 requires every insurer writing an automobile liability policy to provide “written notice” offering the insured UM/UIM coverage in limits not less than the liability limits for bodily injury or death.  If the insurer fails to provide the written notice, the UM/UIM coverage limits become equal to the bodily injury liability limits of the policy.  The Appeals Court rejected Progressive’s argument that the recording of the telephone conversation should satisfy the written notice requirement.  The Court reasoned that the plain meaning of the term “written notice” in the statute requires the offer to be communicated in writing.  The Court further explained that oral notification does not provide the same opportunity for review and understanding that written notification provides, thus a requirement of actual written notice would not frustrate the legislature’s intent. Because Progressive failed to provide the written notice required by A.R.S. § 20-259.01, Giant’s UM coverage was expanded by operation of law to $1,000,000. 

Judge Hall authored the opinion, Judges Weisberg and Gemmill concurred.