The New Hampshire Supreme Court recently ruled on a significant case regarding uninsured and underinsured motorist (UIM) coverage. The case, Royce v. State Farm Fire & Casualty Company, revolves around whether a rejection of UIM coverage remains valid when an insured increases their liability coverage. This decision affects how insurance policies are interpreted in the state, particularly regarding coverage renewals and increases.
The court's ruling, issued on July 24, 2026, clarifies the extent of UIM coverage in umbrella policies. It specifically addresses the situation of Susan D. Royce, who sought coverage after being injured in an accident while riding as a passenger in her sister's vehicle. The ruling is crucial for policyholders and insurers alike, as it sets a precedent for how UIM coverage is handled in similar cases.
Background
The case involves Susan D. Royce, the plaintiff, and State Farm Fire and Casualty Company, the defendant. The dispute arose after Royce was injured in 2021 while a passenger in her sister Katherine Royce's vehicle. Katherine had purchased a personal liability umbrella policy from State Farm in 2000, which included a rejection of UIM coverage at the time of purchase.
Initially, Katherine opted for a $1 million umbrella policy and rejected UIM coverage. However, in 2001, she requested an increase in her umbrella liability limit to $5 million. State Farm approved this increase without requiring a new rejection of UIM coverage. After Susan was injured, she sought UIM coverage under Katherine's policy, which State Farm denied, citing the initial rejection from 2000. This led to the lawsuit seeking a declaratory judgment that UIM coverage should apply to the increased policy limit.
The Ruling
The New Hampshire Supreme Court ruled in favor of Susan D. Royce, reversing the lower court's decision that had granted summary judgment to State Farm. The court determined that Katherine's request for a $4 million increase in her umbrella coverage constituted a purchase of additional insurance, which triggered the statutory requirement for UIM coverage under RSA 264:15, I.
The court stated, "Katherine 'elect[ed] to purchase' insurance when she modified her policy to quintuple her umbrella coverage."
Furthermore, the court emphasized that Katherine did not reject UIM coverage when she increased her policy limits. However, the court also upheld that Katherine's initial rejection of UIM coverage remained effective for the original $1 million coverage she purchased in 2000. This distinction is critical as it delineates the circumstances under which UIM coverage is applicable.
Impact
The ruling has significant implications for insurance policyholders in New Hampshire. It clarifies that an increase in coverage limits can trigger automatic UIM coverage, even if the insured had previously rejected such coverage. This decision may encourage policyholders to reconsider their coverage options when modifying their policies, knowing that they could gain additional protections without needing to re-sign waivers.
Moreover, the ruling reinforces the importance of understanding the implications of rejecting UIM coverage at the time of policy purchase. Insurers will need to adjust their practices to ensure compliance with the court's interpretation of the law, potentially leading to changes in how policies are drafted and renewed.
What's Next
Following this ruling, State Farm may consider appealing the decision or seeking further clarification on the application of UIM coverage in similar cases. Additionally, related cases may emerge as policyholders reassess their insurance coverage in light of this ruling.