Personal Injury Protection (PIP) coverage is a product of statute in Washington. RCW 48.22.085. The statute requires insurers to offer PIP coverage for any new policy issued in Washington. However, the insured is not required to accept PIP coverage. Regarding rejection, the PIP statute provides as follows:

(2) A named insured may reject, in writing, personal injury protection coverage and the requirements of subsection (1) of this section shall not apply. If a named insured rejects personal injury protection coverage:

(a) the rejection is valid and binding as to all levels of coverage and on all persons who might have otherwise been insured under such coverage; and

(b) the insurer is not required to include PIP protection coverage in any supplemental, renewal, or replacement policy unless a named insured subsequently requests such coverage in writing.

RCW 48.22.085(2).

On February 23, 2017, Progressive issued a personal auto policy to named insured Jesus Mendoza. At the time that he purchased the policy, Mr. Mendoza rejected PIP coverage. When the policy renewed in February of 2018, Mr. Mendoza added his mother, Ms. Esther Madrigal de Mendoza as an insured under the policy and also added her vehicle.

On July 28, 2018 Ms. Madrigal de Mendoza was involved in an automobile accident. She made a claim for PIP benefits under the Progressive policy. Progressive rejected coverage on the basis that PIP had been waived.

Ms. Madrigal de Mendoza issued a Notice of Violation under the Insurance Fair Conduct Act claiming that Progressive had an obligation to re-offer PIP coverage when she and her vehicle were added to the policy upon renewal. Following receipt of the IFCA notice, Progressive filed a Complaint for Declaratory Judgment seeking a judicial determination of its rights and obligations under the subject policy.

The parties later filed Cross-Motions for Summary Judgment on the single coverage issue. Progressive’s position was that the PIP statute was unambiguous and should be enforced as drafted.

Ms. Madrigal de Mendoza argued that the “material change” doctrine adopted by the Washington Courts in the context of the obligation to re-offer underinsured motorist (UIM) coverage, should be adopted by the Court. In those cases, the Washington Courts have held that even if there is not a strict “new policy” purchased, there may be an obligation on the part of the insurer to re-offer UIM coverage if the insured makes a “material change” to the policy. See e.g., Torgerson v. State Farm Mut. Auto. Ins. Co., 91 Wn. App. 952, 958-959, 957 P.2d 1283 (1998).

The District Court analyzed the issue by assuming, but not deciding, that the “material change” doctrine would apply to PIP coverage under Washington law. The Court concluded that if there was not a “material change” as that rule had been applied by the Washington Courts, then Progressive must prevail.

The District Court noted that the statement from the Torgerson Court that “a majority of jurisdictions which have dealt with the question do not find a new policy created when a party replaces a vehicle covered under an existing policy with a new vehicle.” The Court concluded as well that under Washington’s approach to the “material change” rule, adding a new vehicle or a new insured do not constitute “material change” that would require Progressive to re-offer PIP coverage.

The Court concluded that only changes to coverages or levels of coverage would support a conclusion that there had been a material change to the policy. Thus, even if a “material change” rule were to be applied in the PIP context – something that the Court again did not expressly hold – there was no basis for requiring Progressive to re-offer PIP coverage to the Mendozas. Summary Judgment was granted in favor of Progressive.

There are a couple of things that we find particularly instructive about the Mendoza case. First, claims and underwriting personnel should be aware of the “material change” rule, particularly as it concerns UIM coverage. Where there is a waiver of either PIP or UIM coverage, we would encourage claims personnel to ensure that no “material change” had occurred in the coverages before taking a coverage position.

Also, the Mendoza case highlights the importance and effectiveness of bringing a Declaratory Judgment Action once it becomes clear that there is an actual and justiciable controversy on a coverage issue. By bringing the Declaratory Judgment Action, Progressive was able to focus the case on the sole coverage issue without becoming tied up in cumbersome extra-contractual issues.

Tom Lether and Eric Neal were proud to have represented Progressive in the Mendoza matter. Should you wish to discuss this case or any other issue in further detail, please do not hesitate to contact Tom and Eric at any time.