The decision in Nicholson v. State Farm Mut. Ins. Co. is a win for automobile insurance policyholders in Illinois. It also imposes a new obligation on insurance carriers to obtain a signed coverage election form before binding coverage, when the insured makes a “material change” in the policy.
The Illinois Supreme Court has denied an appeal by State Farm Insurance, thus, allowing to stand the decision of the Illinois Appellate Court in Nicholson v. State Farm Insurance, No. 2-08-0639 (2nd Dist. 2010) construing the obligations of an insurance carrier to provide underinsured motorist coverage pursuant to Section 143a–2 of the Illinois Insurance Code (215 ILCS 5/143a–2 (West 1998). Under the decision, “whenever liability coverage is increased above that provided under the previous policy, insurers must again offer UM (“uninsured motorist”) coverage equal to liability coverage and obtain a signed election declining such equal coverage.” The decision represents an expansion of consumer rights for purchasers of automobile insurance in Illinois in those instances in which UM coverage is elected in amount that is less than the amount of BI (“bodily injury liability”). Previous to the decision announced in Nicholson, only new “applicants” (not existing insureds) were required to be given an offer of coverage. Now, every insured must sign an election of coverage form before any material change in the policy is made, assuming they are selecting coverage for UM that is less than BI.