Understanding Your Auto Insurance Coverage Part 2: Uninsured Motorist Coverage

In my last article, I explained that it is the first in a series of articles written to explain both the basic and complex aspects of auto insurance, so you can utilize this knowledge to protect your family and your personal assets. Last week, I discussed the scope and utility of liability coverage. This week, I am discussing uninsured motorist (UM) and under-insured motorist coverage (UIM).

A) What is it?
UM/UIM coverage is a relatively simple idea. If you are injured by another driver who does not have insurance or does not have enough insurance to fully compensate you for your injuries, then your UM/UIM policy will cover the difference. Under Colorado law, if you have UM coverage, you automatically have UIM coverage, and vice versa.

B) How Does It Work?
Colorado law requires that your auto insurance policy provider offer you the same amount of coverage limits for your UM/UIM coverage that you purchase for your liability coverage (often called bodily injury or BI limits). In fact, your insurance provider is required to send you documentation and be able to prove that they offered to sell you UM/UIM coverage at the same limits as your liability coverage. If you choose not to purchase UM/UIM coverage, which would be a HUGE mistake, the insurance agent is required to have you sign a written rejection of the coverage. This should demonstrate to you just how important this coverage is.

In Colorado, there has been a good bit of litigation in situations where insurance companies cannot prove that a policyholder rejected UM/UIM coverage in writing. The law puts the burden on the insurance companies to prove that they do not owe you UM/UIM coverage because the Colorado legislature wants people in this state to carry that type of coverage as part of their auto insurance. For example, if your insurance provider cannot produce a document showing that you rejected UM/UIM coverage, then in the eyes of the law, your insurance company owes you this coverage even if you never paid any premiums for it.

Also, Colorado lawmakers do not want insurance companies selling you higher BI coverage (protecting others from your mistakes on the road) than UM/UIM coverage (protecting you from other drivers' mistakes on the road) without first giving your written notice that they are legally bound to offer you UM/UIM coverage at the same level of the BI coverage that you are purchasing.

If an insurance company cannot prove that they gave you this advisement in writing at the time your purchased coverage, the law requires the insurance company to pay your claim as if the higher level of UM/UIM coverage had been purchased. For example, if you purchased $50,000 limits in BI coverage and only $25,000 in UM/UIM coverage, your UM/UIM coverage for yourself would be $50,000 unless the insurance company can prove that they offered you $50,000 of UM/UIM coverage at the time you purchased your policy, but you rejected it. Again, this would be true even if you never paid for that higher level of insurance coverage.

C) In What Circumstances Is UM/UIM Coverage Utilized?
As a preliminary matter, if you are injured in a car accident, you are entitled to UM/UIM coverage only if you did not cause the collision. So, in the scenarios that I am going to discuss, presume that you are innocent and that someone else, who we will call the at-fault driver, caused the crash.

1) Uninsured Motorist (UM):
Imagine that you are struck by another driver and it turns out that the at-fault driver has no insurance coverage. If you are injured in this collision, you would normally make a claim with the at-fault driver's insurance for compensation. Unfortunately, if the at-fault driver does not have insurance, you cannot make a claim with an insurance company. At that point, you can only pursue the at-fault driver for compensation. If the at-fault driver did not have the money to afford car insurance premiums, it is very unlikely that he or she will have the personal assets necessary to pay for your medical bills and pain and suffering.

However, if you carry UM coverage, you can make a claim for UM benefits by providing your insurance company with documentation that the at-fault driver was uninsured. For example, you can give your insurance company the traffic accident report documenting that the at-fault driver was cited for driving without insurance. Then, when you want compensation for the injuries, medical expenses, and wage loss that you suffered as a result of the collision, you submit supporting documentation to your own insurance company and request that they pay you for your losses.

Because you purchased UM coverage, your insurance company must now stand in the shoes of the uninsured at-fault driver. That means that they must evaluate your claim and pay you on those claims as if they insured the at-fault driver at the time of the collision. Simply said, when you have UM coverage, it provides you with the peace of mind of knowing that no matter where you go, you are protected from financially irresponsible drivers.

The interesting thing about UM coverage is that when you pay your insurance company for this benefit, they have an obligation to be nice to you. In fact, your insurance company has what is called a quasi-fiduciary duty to treat your interests as if they are equal to the company's interests. This is good to know because if you were making a claim against an insured at-fault driver, his or her insurance company would owe you no fiduciary duty and would have no obligation to be nice or show compassion to you.

On the other hand, when you are making a UM claim with your own insurance company, your provider must fairly evaluate your claim and compensate you if you are entitled to benefits. Consequently, I often tell clients that if given the choice, I would rather process a UM claim with my client's own insurance company than process a claim against an at-fault driver's insurance policy because making a UM claim often results in more favorable financial outcomes for my clients.

2) Under-insured Motorist:
Even though UM and UIM coverage are similar in a lot of ways, UIM coverage is much more complex and extensive and comes into play far more often for my clients than UM coverage. To review, UM coverage only applies in situations where the at-fault driver is uninsured or when the at-fault driver flees the scene of the collision. On the other hand, there are several possible scenarios where UIM coverage applies.

The scenarios include situations where:
a) the at-fault driver severely injures someone, but only has minimal liability policy limits; b) the at-fault driver has an acceptable level of coverage, but he causes a collision involving several vehicles where the combination of the injuries from all of the drivers involved exhausts his limits and is thereby insufficient; and c) the at-fault driver has coverage that would normally suffice, but the injuries he caused are so severe and over the top that his coverage is simply insufficient to fully cover the victim's losses.

When you or your attorney become aware that you will need to file a UIM claim with your insurance company because the at-fault driver's insurance coverage is inadequate to fully cover your losses, you must inform your UIM provider and seek permission from them before you settle with the at-fault driver. Once you reach a tentative settlement with the at-fault driver for the full policy limits, or close to the policy limits, you must then halt settlement efforts with the at-fault driver's insurance and seek written permission from all available UIM providers before you agree to settle your case against the at-fault driver. While it is not mandatory to settle for the policy limits of the at-fault driver's insurance coverage to pursue UIM coverage, the closer you get to settling for the full policy limits, the more likely you will receive UIM benefits.

When you come to your UIM carrier for permission to settle with the at-fault driver, your UIM provider has a choice to make. They can: Grant you written permission to settle with the at-fault driver and his insurance company or Conclude that the at-fault driver possesses sufficient personal assets above the coverage limits. If the UIM provider decides that the at-fault driver has significant personal assets, the UIM provider can deny your request to settle with the at-fault driver, pay you the amount the at-fault driver's insurance company is offering to settle, have you assign them the right to go forward with your case, and then take over your case and pursue the at-fault driver themselves.UIM providers rarely pursue this option and I have only seen an insurance company do this twice in my 23 years as an attorney. This is because it is rare that the at-fault driver has significant assets. But if they do, the UIM provider then pursues the at-fault driver for the amount that they had to pay you for your losses.

This is exactly why you need to have enough liability coverage to protect your personal assets if you severely injure someone in an automobile collision. As I discussed in my prior article, your insurance company will only indemnify you up to the limits of the coverage you purchased with them. It is extremely important to purchase an appropriate level of coverage for both your BI and UM/UIM coverage, because there is no guarantee that the coverage you purchase will always protect you from personal liability.

Once you receive written permission from your UIM carrier to settle with the at-fault driver and his insurance company, you are then free to accept the settlement money from the at-fault driver and file a claim with your UIM provider. In this demand, you will ask your UIM provider to supplement the inadequate amount of settlement money that you received from the at-fault driver and cover the actual value of your losses (up to the limits of your UIM coverage).

For example, imagine a scenario where you are injured in an automobile collision and you have to undergo expensive back surgery as a result of the crash. If the at-fault driver only has $25,000 in coverage, you would receive permission to settle with the at-fault driver with your UIM provider and then make a claim against your UIM provider. If you have significant medical bills and you possess a $50,000 UIM policy, the UIM provider will usually surrender the $50,000 policy without much consternation.

Unfortunately, making a UIM claim does not always go as smoothly as the above scenario, especially if the injured victim has a significant pre-existing condition or suffers some other kind of injury that occurred after the at-issue crash. Also, if you have extremely high UIM coverage limits, perhaps a million dollars or more, the UIM provider will want to really put up a fight as to the amount of money that is appropriate to compensate you for your injuries and losses.

A great deal of litigation in this area centers around how adequately or reasonably a UIM claims adjuster evaluates and pays UM/UIM benefits that are due. Successful actions that are brought against your insurance company for the unreasonable denial or delay of benefits can result in a monetary windfall for you in the form of statutory penalties imposed on the insurance company for wrongfully withholding benefits that should have been paid.

D) SEARCHING FOR UM/UIM COVERAGE:
If you are involved in a car accident and the vehicle that you are riding in has UM/UIM coverage, you are entitled to those benefits whether you are the driver, occupant, owner of the car, or simply a person catching a ride. Oftentimes, the most obvious place to find UM/UIM coverage is to look at the insurance policy of the car in which you were riding at the time of the crash. Nevertheless, if you are injured in a motor vehicle collision, a good attorney will look for applicable UM/UIM coverage in less obvious areas as well.

Again, if you are riding as a passenger in a car that is involved in a crash, you can look to recover from that vehicle's UM/UIM coverage. However, you can also stack any UM/UIM coverage that you carry on your car (which may have just been sitting at home in your garage) on top of the other car's policy even though your car was not involved in the crash. Your UM/UIM coverage follows you around even if you are not riding in one of the cars covered by your policy.

Also, if you live with family members who have cars with UM/UIM coverage, you can stack that coverage on top of any other available UM/UIM coverage to pay for your injuries. Furthermore, if you are injured in a crash while driving a company vehicle, you can make a claim against any UM/UIM coverage that your employer carries. In this situation, employees often get confused because they do not think that they can make a UM/UIM claim against their employer in a workers' compensation claim.

Even though you cannot normally sue your employer for injuries that occur at work under the "exclusive remedy rule," you can make a UM/UIM claim against your employer's auto insurance if they carry such coverage on the vehicle that was involved in the crash. As you can see, any car crash can have as many as two, or perhaps as many as five, applicable UM/UIM policies. Consequently, it is important for your attorney to diligently search for and find any and all applicable UM/UIM policies when you are injured in a car crash, especially when you are severely injured and in desperate need of compensation.

CONCLUSION:
In life, there are many things that you cannot change. You cannot change the fact that some people are going to drive without auto insurance or with inadequate levels of liability coverage. You cannot change the fact that some of these financially irresponsible drivers will operate their vehicles in a negligent manner and injure others in car crashes. However, if you are injured by another driver who does not have insurance or does not have enough insurance, you can ensure that you can be fairly compensated for your losses by purchasing UM/UIM coverage. Navigating UM/UIM claims can be complicated. Anderson Hemmat is here to help you. Give us a call for a free consultation.