Mark Lynn Elliott v. Liberty Mutual Insurance Company, 983 F.2d 1055, 4th Cir. (1993)

983 F.
2d 1055
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of

unpublished dispositions is disfavored except for establishing
res judicata, estoppel, or the law of the case and requires
service of copies of cited unpublished dispositions of the Fourth
Circuit.
Mark Lynn ELLIOTT, Plaintiff-Appellant,
v.
LIBERTY MUTUAL INSURANCE COMPANY, DefendantAppellee.
No. 91-1264.
United States Court of Appeals,

Fourth Circuit.
Argued: October 1, 1992
Decided: January 7, 1993
Appeal from the United States District Court for the Eastern District of
Virginia, at Norfolk.
John Webb Drescher, BREIT, DRESCHER & BREIT, for Appellant.
Alan Brody Rashkind, FURNESS, DAVIS, RASHKIND & SAUNDERS,
P.C., for Appellee.
Billie Hobbs, BREIT, DRESCHER & BREIT, for Appellant.
E.D.Va.
AFFIRMED.
Before ERVIN, Chief Judge, LUTTIG, Circuit Judge, and TRAXLER,
United States District Judge for the District of South Carolina, sitting by
designation.
PER CURIAM:
OPINION
1
Mark Lynn Elliott ("Elliott") appeals from a district court order denying his
request for declaratory relief and ordering judgment in favor of Liberty Mutual
Insurance Company ("Liberty Mutual"). The district court held that Elliott
could not recover under his employer's uninsured and underinsured ("UM")
automobile insurance policy because his employer had effectively rejected
carrying UM coverage in amounts equal to the limit of its liability coverage
("full UM coverage"). Further, the district court held that a previous increase in
the employer's liability coverage, along with an accompanying increased
premium, did not create a new policy. Since under Virginia law an insured only
is required to reject full UM coverage once-when procuring a new policy-the
district court concluded that Elliott's employer was not required to reject full
UM coverage following the liability coverage increase. We agree and,
therefore, affirm.
I.
2
We begin by noting the applicable standard of review. Because the parties

stipulated the relevant facts, our only inquiry concerns state law interpretations
made by the district court. The district court's state law determinations are
reviewed de novo. In conducting a de novo review, an appellate court must
carefully consider a district court's legal analysis of state law questions. Salve
Regina College v. Russell, U.S., 111 S.Ct. 1217, 1221 (1991).
II.
3
Under Virginia law one must carry both liability and UM insurance coverage,
although not necessarily in equal amounts. For example, one may elect UM
coverage at the minimum mandatory financial responsibility limits, yet
purchase liability coverage in a much greater amount. Such a choice appears
simple enough; but due to the Virginia legislature's penchant for constantly
amending its insurance laws, this choice can become complicated.
In 1981, Virginia enacted a notice statute which required all auto insurance
policies (originals and renewals) to contain a legend which alerted an insured
that full UM coverage could be purchased. The next year, 1982, the legislature
transformed the notice statute into a self-operating full UM coverage law: for
all new policies, an insured had to affirmatively reject full UM coverage;
otherwise, full UM coverage automatically attached to the policy. In 1986, the
statute was once again amended, as well as re-codified as Va. Code Ann.
38.22202(B) ("UM statute"). Unlike the 1982 amendment, the 1986
amendment made no substantive change in the law; instead, it reworded a

portion of the statute-insurance premiums "will" increase (rather than the
previous wording of "may" increase) if an insured fails to reject full UM
coverage within the specified time period. Id. As before, with respect to a new
policy, "unless the insured rejects the additional uninsured motorists insurance
coverage by notifying the insurer as provided in subsection B ofs 38.2-2202,"
the insured's UM coverage shall equal his liability coverage. Va. Code Ann.
38.2-2206. Under 38.2-2202(B), the insured has twenty days from the mailing
of the new policy to reject full UM coverage, and "[a]fter twenty days, the
insurer shall be relieved of the obligation ... to attach or imprint the foregoing
statement to any subsequently delivered renewal policy...." Id. Accordingly,
under Virginia law, the rejection requirements of the UM statute do not apply to
renewal policies.
III.
5
The relevant facts are stipulated. In 1989, Elliott, then an employee of Yoder
Dairies ("Yoder"), was seriously injured in an automobile accident while
operating a Yoder delivery truck within the scope of his employment. Yoder
maintained an automobile insurance policy with Liberty Mutual, with Elliott
insured under the policy. Elliott was not at fault in the accident and his medical
expenses quickly exhausted the tortfeasor's liability coverage of $100,000.
Thereafter, Elliott filed suit against the tortfeasor and, in accordance with
Virginia law, also served Liberty Mutual as the applicable UM coverage
carrier. Elliott settled the action against the tortfeasor for $850,000.
Unfortunately for Elliott, Yoder's 1989 auto policy, as written by Liberty
Mutual, only provided UM coverage of $60,000, combined single limits.
The relationship between Liberty Mutual and Yoder had commenced with an
automobile policy in 1975. For all relevant years, the same Liberty Mutual sales
representative handled the Yoder account and dealt directly and exclusively
with the same general manager of Yoder. The district court found that it was
the understanding of the parties that each year the auto policy was renewed.1
For the policy years of 1982, 1983, and 1984, Yoder's general manager, after
being advised of the UM statute by Liberty Mutual's sales representative,
executed a form rejecting full UM coverage while selecting UM coverage at
the minimum mandatory financial responsibility limits ($60,000 combined
single limits). Beginning with the 1987 policy, Yoder increased its liability
coverage from $500,000 to $1,000,000. The UM coverage, however, remained
at the minimum limits.
At issue is the amount of Yoder's 1989 UM coverage. Under Virginia law, if a
tortfeasor's liability coverage exceeds an insured's UM coverage, the insured2

cannot recover under the UM portion of his policy. Accordingly, because the
tortfeasor's liability coverage surpassed Yoder's stated UM coverage, Elliott
was denied recovery under Yoder's UM policy. In an attempt to recover under
Yoder's policy, Elliott filed a declaratory judgment action alleging that the 1989
stated UM limits, as written and agreed upon by the parties, were invalid due to
Liberty Mutual's alleged failure to comply with Virginia's UM statute. The
direct consequence of Liberty Mutual's alleged noncompliance, Elliott argued,
was that Yoder's 1989 UM coverage rose to an amount equaling its liability
coverage-$1,000,000. The district court found for Liberty Mutual, and Elliott
appeals.
IV.
A.
8
At the trial level, and again on appeal, Elliott contends that Liberty Mutual
failed to comply with the notice provisions of 38.2-2202(B), thereby
nullifying Yoder's rejection of full UM coverage. The district court concluded
that since Yoder last affirmatively rejected full UM coverage on December 29,
1983, Liberty Mutual's compliance with the UM statute on that date had to be
scrutinized. The district court then held that Yoder effectively rejected full UM
coverage on December 29, 1983. In reaching its conclusion, the district court
found that the relevant testimony "clearly demonstrate[d] that Yoder was
advised it could reject full UM coverage, and the evidence is undisputed that
Yoder did indeed reject such coverage."
Despite the undisputed fact that Yoder consistently rejected full UM coverage,
Elliott argues that Liberty Mutual's failure to revise its notification form to
adopt the precise statutory language of the UM statute, as amended in 1986,3
voided the application of Yoder's December 29, 1983, rejection of full UM
coverage to any postamendment policy renewals. In light of this court's opinion
in Insurance Co. of N. Am. v. MacMillan, 945 F.2d 729 (4th Cir. 1991), the
district court rejected Elliott's "faulty quotation" argument. In MacMillan, this
court, construing the same Virginia statute, concluded that when an insured
clearly is given a choice to accept or reject full UM coverage, and chooses to
reject, the rejection is effective despite the insurer's failure to issue a notice
precisely as required by 38.2-2202. Id. at 731.
10
We agree with the district court's conclusion that Yoder effectively rejected full
UM coverage even if Liberty Mutual did not comply with the precise language
of the UM statute.4 As the district court correctly observed, "MacMillan
focused on the insured's rejection of UM coverage rather than on the insurer's

duty to provide statutory notice." Additionally, Elliott's position would require
each insurer to revise and reissue a notice (and rejection form) to every insured
who rejected full UM coverage before the effective date of the 1986
amendment to the UM statute, even if the original notice complied with the law
in effect at the time the rejection was made. Considering the cosmetic nature of
the 1986 change in the UM statute, such a legislative intent cannot be inferred,
and indeed, Elliott is unable to cite any authority for such a proposition.
B.
11
Elliott further argues that the district court erred in finding that Yoder's 1987
policy was a renewal policy instead of a new policy. As mentioned before, the
1987 policy increased Yoder's liability coverage from $500,000 to $1,000,000.
Elliott contends that such a substantial increase in coverage in exchange for an
additional premium created a new policy. Great American Ins. v. Cassell, 15
Va. Cir. 214, 223 & 226 (Roanoke, 1988), appeal granted on other grounds and
aff'd, 389 S.E.2d 476 (Va. 1990). Because a new policy was created, Elliott
argues, the UM statute required Liberty Mutual to notify Yoder of its right to
reject full UM coverage. Consequently, Elliott contends that Liberty Mutual's
failure to give such notice resulted in an automatic increase in Yoder's UM
coverage up to the level of its increased liability coverage. Elliott's "new
policy" argument presents a much closer question than his "faulty quotation"
claim. Nonetheless, we agree with the district court's determination that the
1987 policy was a renewal policy.
12
First, as the district court noted, the Supreme Court of Virginia has not ruled on
the question of whether increasing the liability coverage of an existing motor
vehicle insurance policy in exchange for an additional premium creates a new
policy. Second, although the state trial court in Cassell held that an increase in
liability coverage from $500,000 to $1,000,000 did create a new policy, as the
district court thoroughly discussed, Cassell is distinguishable in a number of
respects. Most importantly, the conclusion in Cassell that a substantial increase
in coverage creates a new policy is arguably dicta because the trial court also
concluded that the insurer had contractually obligated itself to give the insured
notice of the right to reject full UM coverage on all new policies and renewals.
As such, the insurer was bound by its failure to do so: "whether considered a
renewal policy or a new policy, since no notice was given, the automatic
increase of uninsured motorist protection attaches, commitment to give such
notice on renewals having been voluntarily made by the [insurer]...." Id. at 226
(emphasis added).
13
The term "renewal" is not defined in the UM statute. It is defined, however, in a

nearby section of Virginia's insurance code:
14
"Renewal"
or "to renew" means (i) the issuance and delivery by an insurer of a
policy superseding at the end of the policy period a policy previously issued and
delivered by the same insurer, providing types and limits of coverage at least equal
to those contained in the policy being superseded,
15
Va. Code Ann. 38.2-2212. Although this definition of "renewal" does not
apply specifically to the UM statute, it does apply to sections of the Virginia
insurance code which deal with liability and uninsured insurance coverage on
motor vehicles. The district court found this definition of "renewal" persuasive.
Accordingly, as Yoder's 1987 policy "provid [ed] types and limits of coverage
at least equal to those contained in the policy being superseded," the district
court held that the 1987 policy was a renewal policy. We agree with the district
court's conclusion that the definition of "renewal" found in the Virginia
insurance code is a stronger indicator of what constitutes a renewal under the
UM statute than the Cassell case.
B.
16
Elliott's two remaining grounds of appeal are without merit. First, Elliott argues
that the district court erred in failing to find that a facial ambiguity somehow
tainted Liberty Mutual's 1983 election form 5 because it did not explain the term
"financial responsibility limits." Assuming, arguendo, that the form was
facially ambiguous does not aid Elliott because the unequivocal testimony of
Yoder's general manager shows that he knew exactly what the term meant-an
election to carry UM coverage at the lowest level allowed by law, whatever
that amount might be. Second, Elliott, citing White v. National Union Fire Ins.,
913 F.2d 165 (4th Cir. 1990), contends that since Liberty Mutual failed to give
notice in strict accordance with the UM statute, it is irrelevant that the parties
intended to reject full UM coverage. Initially, this court notes that this assertion
is simply a restatement of Elliott's already rejected "faulty quotation" argument.
See supra part III.A. Elliott correctly points out that under Virginia law an
inference that the parties intended to reject full UM coverage does not suffice as
an actual rejection. White, at 169. This case, however, does not involve any
inferences-every time Yoder was given an option to accept or reject full UM
coverage, it rejected the extra coverage. As such, White is not applicable.
V.
17
For the foregoing reasons, the judgment of the district court is affirmed.
AFFIRMED
Further evidence that the parties treated all succeeding policies as renewals is
the fact that since 1975 Yoder has filled out only one application for insurance,
that being the original one
Virginia statutorily defines"insured" for UM coverage purposes as "the named

insured and, ... any person who uses the motor vehicle to which the policy
applies, with the expressed or implied consent of the named insured." Va. Code
Ann. 38.2-2206(B). In this context, Yoder and Elliott are considered the
"insured" interchangeably
As mentioned before, the 1986 amendment changed the UM statute to read that
insurance premiums "will" increase if an insured did not reject full UM
coverage, revising the previous version of the UM statute which declared that
insurance premiums "may" increase if an insured failed to reject full UM
coverage
We note that the notice form which actually accompanied the rejection
executed on December 29, 1983, contained word for word, with some additions
but no deletions, the language required by the UM statute then in effect.
Further, Elliott does not contend that the notice actually used was defective
This is the election/rejection form executed by Yoder's general manager 5405

35 10 on December 29, 1983. See supra part III.A

Mark Lynn Elliott v. Liberty Mutual Insurance Company, 983 F.2d 1055, 4th Cir. (1993)

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983 F.

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of

United States Court of Appeals,

We begin by noting the applicable standard of review. Because the parties

amendment made no substantive change in the law; instead, it reworded a

At issue is the amount of Yoder's 1989 UM coverage. Under Virginia law, if a

tortfeasor's liability coverage exceeds an insured's UM coverage, the insured2

focused on the insured's rejection of UM coverage rather than on the insurer's

The term "renewal" is not defined in the UM statute. It is defined, however, in a

Virginia statutorily defines"insured" for UM coverage purposes as "the named

This is the election/rejection form executed by Yoder's general manager 5405

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