Traffic Accident Law Center - What if the person who hit me doesn’t have insurance?
This blog entry is part of a series of entries concerning auto insurance coverage and provides food for thought concerning buying auto insurance in California. This entry looks at the purchase of auto insurance from a point of view that may be different than your insurance company or insurance agent.
The number of uninsured motorists in California is surprisingly high when you consider that having auto insurance is required by law. However, people with the best intentions are being challenged in this difficult economy and one of the expenses often given up is paying for insurance. If the insurance company doesn’t receive its premium payment, cancellation of the insurance policy quickly follows. When the at-fault driver is uninsured, sometimes the only recourse following a car accident is to pursue an uninsured motorist claim against your own auto policy.
As the name implies, uninsured motorist coverage can apply anytime that an uninsured motorist is involved in an accident. Where there is insurance, a claim is made against the at-fault driver’s insurance policy. Where the at-fault driver is uninsured, a claim is made against the victim’s uninsured motorist coverage on their own auto policy. This claim is capped at the amount of uninsured motorist coverage purchased under the victim’s policy. The amount of uninsured motorist coverage that can be purchased is typically capped at the amount of liability coverage purchased. In other words, insurance companies do not offer $100,000 of uninsured motorist coverage to $15,000/$30,000 liability policy holders. On the other hand, the purchaser can opt for less uninsured motorist coverage, for example liability coverage of $50,000/$100,000 but uninsured motorist coverage of only $15,000/$30,000.
The most important point in this blog is that the amount of uninsured motorist coverage purchased also provides that same amount in under-insured motorist coverage. Under-insured motorist coverage pertains to the situation where the victim’s damages are greater than the insurance available from the at-fault driver’s insurance as well as all available insurance is exhausted by the claims of the victim. In that scenario, the victim can turn to his or her own auto insurance policy to pursue any remaining under-insured motorist coverage. “Remaining" is a key word in that sentence since, in California, the insurance company’s coverage is reduced by all of the other money collected by the insured.
Let’s look at an example. In a prior blog, I wrote about hypo accident #2 where there was over $50,000 of medical treatment bills and the victim was unable to work and missed a promotion which resulted in both past and future lost income. The “bodily injury" claim, which is largely comprised of the medical bills, income loss, and damages for pain and suffering, is clearly worth more than $50,000 (since the medical bills alone exceed $50,000). But, in accident hypo #2, the at-fault driver only has $50,000 of liability insurance. Is the at-fault driver under-insured? Yes. If this is the only liability insurance available for the victim’s damages and it is exhausted by a settlement with the at-fault driver then the victim can pursue an under-insured motorist claim against his or her own auto policy. To recover, however, the uninsured motorist coverage must be greater than $50,000 settlement and he or she can only recover the remaining balance of the uninsured motorist coverage. Confusing? Let’s break it down. One person buys a large liability policy but opts to reduce the uninsured motorist coverage down to $15,000/$30,000. A second person buys the same large liability policy and has matching uninsured motorist limits of $250,000. Both are victims in the same accident where they are the only victims and the at-fault driver has liability limits of $50,000/$100,000. Both of the victims have medical bills over $150,000. Each settles with the at-fault driver for the liability personal limit of $50,000 (which does not cover all of their damages). The first victim cannot collect on an under-insured motorist claim because he opted to reduce the coverage down to $15,000 and more than that amount was obtained by the settlement. The second victim however collects the policy limit of $50,000 from the at-fault driver’s insurance and can then pursue up to another $200,000 from her own insurance (her UIM coverage limit of $250,000 minus the $50,000 of liability coverage collected from the at-fault driver). Explaining these coverage nuances after the accident, after the injuries, and after the bills come in is an emotional seesaw. The time to decide the right amount of uninsured motorist coverage is obviously before the accident, the injuries and the bills.
One way to look at Uninsured / Under-insured motorist coverage is that it is the amount of insurance you are taking out for you. No matter what the coverage or the complete lack of coverage, uninsured motorist creates access to money to pay for damages arising from a car accident whether the at-fault driver is totally uninsured or just less insured than you insured yourself. Some people who we see carrying high uninsured motorist coverage include people without health insurance, people who are susceptible to injury possibly due to a pre-existing condition, people with high incomes, and people who simply want to protect themselves.
The information above is to prompt thought and discussion. It is not to be construed as legal advice. Each individual’s insurance needs must be individually reviewed and difficult decisions need to be determined between what insurance coverage is appropriate and how much the individual can afford to pay for insurance coverage.
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