Understanding what the policy limits numbers mean is the first step in understanding the various types of coverage. In the example above, $20,000 per person means that the most the at-fault driver’s insurance company would have to pay to a single person injured due to the negligence of its insured is $20,000 for a particular accident. The $40,000 per accident limit applies to the maximum the insurance company will ever be required to pay for an accident no matter how many people were injured and no matter how significant the injuries. For example, assume 4 people were injured due to the negligence of a driver with this type of policy. Every person in the wreck had treatment consisting of over $30,000 in medical bills. No one person of the 4 may receive more than $20,000 for their injuries (inclusive of medical bills). Additionally, the maximum the insurance company is required to pay out to all 4 of the injured parties is a TOTAL of $40,000!
Fortunately, many of us purchase what is known as underinsured motorist coverage. Like uninsured motorist coverage, underinsured coverage puts your own insurance company in the shoes of the negligent party when the negligent party does not have enough insurance coverage to pay for an accident victim’s injuries. Typical underinsured motorist policies are written with limits from as low as a minimum of $25,000 to a maximum of anywhere from $300,000 to $500,000. Additionally, some people choose to purchase a PLUP or personal liability umbrella policy. PLUP coverage picks up where the regular auto insurance policy leaves off. For instance, assume you have an auto injury with damages that are equivalent to $1,000,000. The person that caused the accident has an auto policy with limits of $300,000. You can recover the $300,000 from the auto carrier and attempt to recover the remaining $700,000 from the PLUP policy if the at-fault driver has one.
Many clients ask why they must pursue their own insurance when they were not at fault. It is a great question and one with a variety of answers. One important reason why you should is because you are paying for these premiums in case the exact scenario above occurs. If you pay for these premiums for the rest of your life and choose not to access them even when you need them, the insurance company enjoys a substantial windfall. The other question that is often asked is why not go after the at-fault party individually and garnish his or her wages. This is often a hopeless endeavor which results in chasing an individual and his or her assets across the country in order to satisfy the judgment. Furthermore, if the judgment is large enough, the person may simply file bankruptcy and you will be lumped in with other creditors.
There are many procedures that one must follow in pursuing an uninsured or underinsured motorist claim. One of the first is the demand of arbitration. The arbitration process, rather than a jury trial, is the means by which an uninsured or underinsured motorist claim is resolved if settlement is not feasible. Some insurance carriers have written a time limitation within its policy which acts as a statute of limitations. Under this particular policy provision, if arbitration is not demanded within the specified time period, usually 1-2 year from the date of accident, your uninsured or underinsured motorist claim will be extinguished.
If you reach an agreement to settle for the policy limits of the negligent party’s insurance carrier, you must get the permission from the underinsured motorist carrier to accept the settlement. Failure to do so will likely extinguish your claim. Moreover, you must be careful not to sign away your rights to the underinsured motorist claim when settling and signing a release with the at-fault carrier. Most releases release EVERYONE! Many of the releases I review in such cases require a substantial amount of amendments and additional language protecting the underinsured motorist claim. Finally, one must be cognizant of the set-off that an underinsured motorist carrier is entitled to from the monies already received from the at-fault party.
With any type of case, it is always best to engage in a free consultation with an attorney who practices plaintiff personal injury law so that you do not do anything to jeopardize your claim. In the case of the various inner workings of uninsured and underinsured motorist claims, this is especially true.