AUTO INSURANCE POLICY EXEMPTION, CALLED A PERMISSIVE DRIVER STEP DOWN PROVISION, INVALID IN THIS CASE

 

In a published decision the Court of Appeals on August 19, 2011 disallowed an attempt by a motor vehicle liability insurance company from reducing its policy limits pursuant to a clause they had added to their policy called  “STEP DOWN PROVISION”. 

This  Step Down Provision  is triggered when a driver other than an insured of the first class is operating the covered vehicle with permission.

Shelter maintained that the lower bodily injury liability limits of $25,000 each person/$50,000 each accident were applicable. Yates rejected Shelter’s interpretation of the insurance policy and demanded the remaining $25,000. Yates argues that as a named insured under the policy, he was entitled to the higher bodily injury liability limit of $50,000.

The court did not totally throw out such provisions, but in this case they found grounds based on lack of a fair notice to the policyholder to throw out the application of this policy provision,

” we will address only one: that the permissive driver step-down provision is unenforceable under the doctrine of reasonable expectations. Yates points out that he paid a premium for the higher bodily injury liability limits, for “full coverage protection,” and was led to believe by the declarations page of the policy that the higher bodily liability limits of $50,000 each person/$100,000 each accident were applicable.”

 

See Ct. of Appeals case for Aug 19 2011″:   YATES, RICHARD  VS.  SHELTER MUTUAL INSURANCE COMPANY

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