Auto-Insurance-Based Payment Sources and Coverage Types
In chapter 2, we look at the North Carolina standard form auto policy and discuss the basic legal principles of insurance. In this chapter our focus is on how each of the coverage types is triggered, and what the insurance companies owe under each section of the insurance policy. Since multiple coverages can often be accessed, each money source should be considered to determine whether duplicate coverage and duplicate payment of covered losses might be available.
Liability Insurance Coverage
Liability coverage protects other drivers and individuals if you cause an accident. This is mandatory coverage and will be part of every auto insurance policy issued in North Carolina.
Liability means “legally responsible.” To collect from another driver’s liability insurance, you must prove that the other driver was careless or negligent. You must also show that you did not contribute to causing the accident. Beware in North Carolina because our pure contributory negligence law is the most difficult negligence law in the country. If you are slightly at fault for the accident (even just 1 percent to blame), you have no claims or right of payment. Never admit blame or responsibility in discussions with insurance adjusters and other drivers.
Liability insurance follows the vehicle in North Carolina. If you are driving your own car, your personal auto policy will provide liability coverage if you cause an accident. If you are driving a borrowed car, the car owner’s liability policy is first in line to pay for the damages caused to other parties. All victims will present their claims under the policy covering the at-fault vehicle. If multiple drivers and vehicles are responsible for causing the accident, claims can be presented against multiple policies. This allows you to add all available liability coverage together and increase the insurance money available to pay your claims.
John and Andy are both driving separate vehicles and both enter the same intersection under a red light. Alice enters the intersection under a green light and is struck by John and Andy. Alice’s injuries and losses are caused by the combined negligence of two drivers. Therefore, she can collect from John’s liability policy and Andy’s liability policy.
The two types of liability coverage found on every policy are property damage liability and bodily injury liability. Property damage coverage pays for all vehicle damage and other personal property loss. Bodily injury liability is separate coverage for physical injuries caused in the accident. Only innocent victims can collect, including other drivers and all innocent guest passengers. The coverage for bodily injury is typically split-limits, with a single per-person limit and a per-accident limit on the same policy. The per-person limit is the most any single victim can collect from that policy, regardless of the extent of medical care costs or the severity of injury. The per-accident limit is the most any group of victims will receive for all injury claims arising from a single accident or occurrence.
Liability coverage on auto policies is typically issued in the following amounts:
- property damage—$25,000.00
bodily injury per victim / per occurrence—$30,000.00/$60,000.00
- property damage—$50,000.00
bodily injury per victim / per occurrence—$50,000.00/$100,000.00
- property damage—$100,000.00
bodily injury per victim / per occurrence—$100,000.00/$300,000.00
- property damage—$100,000.00
bodily injury—$300,000.00 combined single limit
- property damage—$100,000.00
bodily injury—per victim / per occurrence $250,000.00/$500,000.00
- property damage—$250,000.00
bodily injury—per victim / per occurrence $500,000.00/$1,000,000.00
Advice on Buying Liability Insurance
If you cause an accident, you are personally responsible to pay for all vehicle damage, personal property damage, victim medical care costs, victim wage loss, and for all victims’ pain and suffering. Car accidents cause serious injuries, and the victims’ claims can easily exceed $100,000.00. If you do not purchase enough coverage, a victim can sue you and secure a verdict for the full value of all losses. If your insurance is not sufficient to pay the verdict in full, they can levy and take your bank accounts and personal property, place a judgment lien on your home, and collect the uninsured portion of their verdict from your personal wealth.
Always carry enough insurance. This determination depends in part on the personal wealth and assets you have to protect. We recommend that any driver carry at least $100,000.00 per person / $300,000.00 per occurrence in bodily injury liability coverage.
The cost of a single emergency room visit following a serious accident can approach the state’s required minimum liability coverage limit. Thus, even if you have little wealth to protect, it costs very little to increase your coverage limits above the state minimums. If you carry sufficient coverage, you can trust that your insurance carrier will have sufficient resources to resolve almost any claim that follows a typical car accident.
Excess Liability Coverage—Accessing Multiple Auto Policies
Accident victims often fail to present their claims and collect under all available insurance policies! They leave their money in the insurance company’s hands simply because they don’t know where to look for additional coverage and benefits. If the insurance coverage on the vehicle is not sufficient to pay victim claims, it is essential to look carefully to identify hidden policies that will help to fund your claims.
Later in this chapter, we discuss excess liability coverage scenarios that do not involve auto insurance, including commercial/business liability insurance (which applies when an employee causes an accident during work hours) and homeowner’s umbrella insurance. These nonauto sources are typically high-limits policies that provide a great deal of money to cover your losses and expenses. In serious and catastrophic injury cases, always look for these hidden policies, as they provide large money sources to cover your claims.
Example: Hidden Policy Pays $550,000.00!
We represented Carol F., who approached us following an accident. She and her husband had already secured a policy limits offer of $100,000.00. They simply wanted our advice to confirm that this was the only money available. After performing an asset search, we determined that the at-fault driver had very little wealth and no real estate to pursue. However, we looked closely at the collision facts and noticed that the at-fault driver was driving a late-model pickup truck at lunchtime near downtown Raleigh. On suspicion that he may have been employed, we compelled the liability insurer’s legal representatives to secure a sworn affidavit from the at-fault driver disclosing the nature of his journey and his point of origin and destination, identifying his employer, and confirming whether he was within the scope of his employment when the crash occurred. After learning that he was employed, we were able to collect an additional $575,000.00 from the employer’s commercial liability policy for Carol. Before they secured the advice of counsel, they were very close to signing a release limiting their payment to the initial/primary coverage. This release would have barred all additional claims. Thankfully, the hidden excess commercial policy paid over a half million dollars in additional benefits for Carol’s family.
The most common excess liability scenario is the borrowed vehicle accident. Liability insurance follows the vehicle in North Carolina. If a driver borrows a nonowned vehicle and causes an accident, the first source for payment of victims’ claims will be the vehicle owner’s policy. If the owner’s policy is insufficient to pay all losses, the driver’s personal auto policy provides secondary or “excess” liability insurance. This coverage is called excess because it pays only after all coverage for the primary policy (the policy covering the at-fault vehicle) is paid out and exhausted.
John borrows Andy’s car to run errands. John causes an accident after he disregards a stop sign and collides with Alice. The primary policy covering Andy and Andy’s car provides the state minimum mandatory liability coverage of $30,000.00 per person for bodily injury. John has his own car insurance with bodily injury liability coverage of $100,000.00 per person. The total liability insurance available to pay Alice’s injury claims is $130,000.00. If Alice’s injury claims are valued at $90,000.00, John’s primary policy pays the first $30,000.00. Andy’s personal auto policy provides excess liability coverage to pay the additional $60,000.00.
Another common excess liability scenario is the extra liability policy in the driver’s household. The accident victim should request the policy information for every “family member” (person related by blood or marriage who resided with the at-fault driver on the accident date) whenever the value of the injury claim exceeds the coverage limit available on the policy that covers the at-fault vehicle. If the at-fault driver has his or her own policy, this coverage would be second in line behind the vehicle policy to pay victim losses. If these two policies are not sufficient to cover all injury claims, family members’ auto liability policies will often provide additional, excess coverage to pay the victim’s claims. Be sure to look for all coverage to ensure that your claims are paid in full.
Beware of any partial settlements in excess liability cases! If multiple liability policies protect the at-fault driver, you must settle your claim with one single settlement against all liability carriers. If you sign a release to collect under just the primary policy, this release waives and stops all claims against any available excess coverage. Whenever you are facing a policy limits settlement offer that does not fully pay your claims, take the time to scrutinize the collision facts, vehicle ownership facts, and the driver’s employment and wealth before you accept the policy limits offer that leaves your losses only partially paid.
Uninsured Motorist Coverage
Uninsured motorist (UM) coverage pays the claims of all victims who are injured by a driver who failed to pay premiums and carry insurance and victims of hit-and-run drivers. Under the UM policy, you may claim payments for car and personal property damage under the uninsured motorist property damage (UMPD) coverage, and you can also collect for all injury claims under the uninsured motorist bodily injury (UMBI) coverage.
In hit-and-run cases, you cannot use the uninsured motorist coverage to pay for your property damage. This is unfortunate because the collision deductible is almost always higher than the standard $100.00 deductible that applies to UMPD claims. Also, in a hit-and-run accident, there must be a “hit,” or some measure of contact with the at-fault vehicle. If there is no contact, these claims are called “phantom vehicle” cases. For example, if a driver crosses the center line and you leave the roadway to avoid the collision, and if you succeed in avoiding any impact and the other driver leaves the scene, you cannot use UM coverage to fund your accident claims. Essentially, you are left with no coverage for injury claims other than medical payments. This leaves the victim with no compensation for lost wages or for pain and suffering.
The more typical UM claim involves a driver who failed to make timely premium payments or failed to ever buy insurance and who later causes an accident. If you are injured by an uninsured driver, uninsured motorist coverage pays for your claims. Once the claim is closed, the insurance company that paid UM benefits can then sue the uninsured driver for reimbursement, and they can also suspend the uninsured driver’s North Carolina driver’s license.
UM coverage applies exactly the same way that liability coverage applies. You should not trust the UM adjusters to volunteer full and fair payment. Instead, you should expect them to oppose your claims. In fact, they will act just as though the uninsured driver was their insured/policyholder. They will question your claims and force you to provide recorded statements and medical history, and they will even hire a lawyer to defend the uninsured driver in court if a trial is necessary to secure fair payment for your injuries and losses.
If you present a claim for car replacement or repairs under your UM policy, the adjuster will pay fairly with little resistance. This is solely because our insurance regulations require fair payment on property damage claims. However, if you present an injury claim, you should be extremely careful in all discussions and dealings. The UM adjuster will always seek to minimize what they pay in every injury claim. Just remember that the UM adjuster represents the uninsured driver, not the victims or the policyholder who paid the premiums!
Don’t Worry about Your Premiums
Many people resist using their own insurance when another driver causes their accident. However, if the other driver failed to carry liability insurance, UM coverage is the only way to collect for your injuries and losses. Look out for liability defenses! If you were slightly at fault for the accident, your UM adjuster owes nothing for your accident claims. Again, UM adjusters represent the uninsured driver, and they behave just as they would if you were presenting a claim under liability insurance. If you are slightly at fault, our harsh negligence laws disallow payment rights. Thus, expect the UM adjuster to place some blame with you if you were driving.
The good news is if you do receive payments through the UM policy, this confirms the insurer’s determination that you did nothing wrong. Thus, if you collect under the UM policy, this will not cause any increase in your insurance premiums. Also, the insurance company will not drop your policy or discontinue future coverage.
Stacking Multiple UM Policies
If you are eligible for UM benefits, you can collect under multiple policies! North Carolina law allows interpolicy stacking of uninsured motorist (UM) and underinsured motorist (UIM) policies. Intrapolicy stacking, which refers to stacking coverage within the same policy, is not allowed. Thus, the focus in your search for coverage is whether there are different policies with different policy numbers that provide UM coverage in your case. Here are the types of policies that provide UM coverage to accident victims:
- UM policy for the vehicle you were riding in
- UM coverage on every car insurance policy that you own and which shows you as a “named insured” on the policy declarations
- UM policies for all “resident relatives”—here, you can collect under every policy in your household that insures any other driver who is related to you by blood or marriage.
You should search carefully for all applicable policies, and you can collect full benefits from each and every policy that applies.
Avoid Partial Settlements
If you have a large claim involving serious injury, never settle early and always make sure that every applicable UM policy is brought into the settlement discussions. Insurance adjusters want to settle your claims and close their file. They will not help you build your damages claim, find reasons why they should pay you more money, or help you to identify hidden coverage. Also, if you settle the UM claim with the obvious/primary UM carrier, they will take a full release, which will block your right to collect additional UM payments from outside policies. Settle your claims only after you have looked at the complete medical picture, only after you have determined the likely verdict value of your injury case, and only after you have compelled all UM insurance carriers to apply all stackable policies to determine the total amount of coverage available in your case.
Alice is riding with her friend Sherry when an uninsured driver runs a red light and causes a serious collision. Sherry has UM coverage with bodily injury coverage limits of $30,000.00 per person. Alice lives in a separate residence and has her own car insurance policy with UMBI limits of $50,000.00 per person. Alice’s husband owns a motorcycle and has his bike insurance under a separate policy with UMBI limits of $100,000.00 per person. Alice’s mother-in-law, Mary, lives with them in the same residence, and Mary has her own auto insurance policy with UMBI limits of $50,000.00 per person. All of these policies can be accessed, and Alice therefore has a total of $230,000.00 to pay for her injury claims arising from her accident.
Advice on Buying Uninsured Motorist Coverage
Even though insurance is mandatory, many drivers fail to make their monthly payments and they lose their coverage. Unfortunately, accident victims often learn that the responsible driver did not carry insurance. This is why our legislature recently mandated uninsured motorist (UM) coverage on all auto policies.
UM coverage is very inexpensive! I recommend that you always carry at least $100,000.00 per person / $300,000.00 per occurrence for UM bodily injury. It costs very little to protect yourself and to ensure that there is sufficient money to pay your claims in full if you ever fall victim to an uninsured driver.
Underinsured Motorist Coverage
Underinsured motorists (UIM) coverage is very similar to uninsured motorist coverage. The only difference is it applies in cases where the at-fault vehicle does have liability insurance. UIM coverage is extra insurance available to pay your claims if the at-fault driver’s liability insurance limits are lower than the UIM limits available under all policies. To determine if you can use the UIM coverage, you must look at all available liability policies and all available UIM policies. After adding together all per-person coverages for each type of policy, you compare the aggregate liability coverage limit to the aggregate UIM coverage limit. If the UIM limit is higher, you can collect additional benefits through the UIM policies. To determine the amount of UIM available, simply subtract the total available liability coverage from the total available UIM; the difference is the amount that the UIM coverage would pay above the liability policies.
Example: Calculating Available UIM Coverage
John enters an intersection under a red light and strikes Alice. John has liability coverage of $30,000.00 per person for bodily injury. Alice has a personal auto policy with UIM coverage limits of $100,000.00 per victim. Because John’s coverage limits are lower than Alice’s UIM limits, her UIM coverage is triggered. If her claims are worth $100,000.00, she collects the first $30,000.00 from John’s liability policy and the remaining $70,000.00 from her policy.
Stacking UIM Policies
UIM coverage is stackable in North Carolina, and the coverage sources are identical to the coverage sources for UM shown above. If multiple policies are available for stacking, the liability limit is subtracted only once! To properly determine the amount of available coverage, you first identify all UIM policies available. After stacking all coverage and determining the total available UIM coverage amount, you then subtract the liability coverage amount from the total available limits.
Example: Using and Stacking UIM
John borrows Andy’s car and causes an accident that injures Alice. Andy has a liability insurance policy with bodily injury coverage limits of $30,000.00 per person. John has his own car insurance with liability limits of $50,000.00 per person. Alice is driving her own car, and she has a UIM policy with a $50,000.00 per person limit. Alice’s husband has a separate car insurance policy that also has UIM limits of $50,000.00 per person for bodily injury. Alice’s daughter also resides with her, and she has another separate car insurance policy with UIM limits of $100,000.00 per person. Adding all liability limits together, we see there is a total of $80,000.00 in liability coverage to fund Alice’s injury claims. The total of all available UIM policies that cover Alice would be $200,000.00. Therefore, Alice can collect up to $200,000.00 for all injury claims, with the first $80,000.00 paid through John’s and Andy’s liability coverage and the remaining $120,000.00 being paid through stackable UIM coverage.
If another driver causes your accident, it is best to collect for car damage and personal property loss through their liability insurance policy. However, if you have collision coverage on your policy, you retain the option to have your vehicle repair or replacement cost paid through your own policy. While your payments would be reduced by the amount of your deductible, your insurance carrier will pursue reimbursement of their payout and your deductible once the collision claim is paid and closed. If the collision was partially your fault, collision coverage will be the only avenue of payment for vehicle damage.
Comprehensive coverage pays for vehicle damage caused by non-collision-based causes, such as storm damage, vandalism, and theft. In North Carolina, collision and comprehensive coverages are paired under the policy and carry the same deductible.
Medical Payments (medpay) coverage is a portable health insurance policy that attaches to your auto insurance package. Medpay is purely optional coverage in North Carolina. It is very inexpensive, and I recommend that you always carry at least $5,000.00 in medpay coverage for all insured vehicles. The cost per vehicle for this coverage would only be approximately $8.00 per month. For that small premium, you have $5,000.00 in immediate coverage for all medical care arising from any car accident. This is a per-person limit and would apply for every passenger in your car. Further, medpay will pay your medical expenses even if you are riding with a friend in a car that is not insured on your policy, when struck by any vehicle while riding a bicycle, or when walking as a pedestrian and under multiple policies when medpay is available from several sources.
Don’t Worry about Your Premiums
If you use medpay to collect for medical expenses arising from an accident that is not your fault, the medical payments claims will not impact your coverage or premiums. Thus, you will not face any additional costs or premium hikes if you collect the full amount of medpay available under your policy. If the accident was your fault, the accident (and not the medical payments claim filing) would result in an increase in premiums either way, but you would not face dropped coverage or any meaningful premium increase as a result of any medpay claim.
Medpay Coverage Allows Duplicate Payments
Medical payments coverage is not subject to rights of subrogation. This means that if you are able to collect your medical expenses through a liability claim against another driver who causes your accident, you do not have to reimburse your medpay carrier for their pay out. Thus, if you have $5,000.00 in medpay and they pay that total amount for your medical bills, you can collect again for the same medical expenses through your claims against the responsible driver’s liability policy. You would not be required to reimburse your medpay carrier. Essentially, you are legally allowed to collect two times for your medical expenses in these cases. In fact, most health insurance coverage also overlaps with medical payments. If your health insurance is the type that does not have rights of subrogation and reimbursement, this would be a third source of payment and collection for medical expenses. Your attorneys will help you to apply overlapping coverages properly to ensure that you secure all insurance benefits available to you.
Available Medpay Coverage Options
Medpay coverage is typically sold in the following increments/amounts:
- $500.00 per person / per accident
- $1,000.00 per person / per accident
- $2,000.00 per person / per accident
- $5,000.00 per person / per accident
- $10,000.00 per person / per accident
- $25,000.00 per person / per accident
- $50,000.00 per person / per accident
- $100,000.00 per person / per accident
Because this coverage is very inexpensive and allows duplicate collection of medical-care costs for accident victims, we strongly recommend that you carry the highest medpay limit that you can afford.
Avoid Attorneys’ Fees on Medpay
If you have medpay coverage and you undergo medical treatment for accident-related injuries, the insurance carrier is required to pay reasonable and necessary medical costs. The treatment must be medical in nature and indeed medically necessary. Also, the billed charges must be reasonable and customary for medical practitioners in the local medical community. Once these conditions are met, the medpay adjuster will pay medpay benefits to you or directly to your doctors.
While lawyers can charge a fee to present your medpay claims, I feel that the coverage is automatic and therefore my law firm files medpay claims for our clients free of charge. You should ask this of any attorney. If you must pay a fee, you may prefer to present your medpay claims alone and without counsel. In these cases, it is always best to use the medpay solely for unpaid medical expenses or as direct reimbursement to you for medical charges that you already paid. Proper use of medpay and careful priority of payment (e.g., pay EMS charges first, as they can garnish wages and impact personal credit faster than other medical bills) will allow you to maximize your net share of the personal injury settlement, protect your personal credit, and allow you access to more medical treatment options.
Stacking and Accessing Multiple Medical Payments Policies
If you have your own personal auto policy, your medpay coverage will always provide benefits unless you are driving a vehicle that you own or that is furnished for your regular use and that is not insured on the same policy that provides medpay coverage. Other than your own policy, you may also look to the following sources of medpay and collect from multiple policies to increase benefits available to pay accident-related medical costs:
- The auto policy for any non-owned vehicle that you occupy at the time of collision—if you are riding with a friend in his or her vehicle, you can collect from your friend’s policy and your own policy.
- A family member’s policy will provide coverage under that family member’s separate policy if the vehicle you occupy at the time of the accident is not owned by any family member or furnished for any family member’s use. “Family member” is defined as any person who lives with you at the time of the accident and is related to you by blood, marriage, or adoption, and this includes a ward or foster child.
If you incur medical expenses following an accident, always look to all available sources for medpay even if the accident is your fault.
Medical Payments Coverage Exclusions
Under the standard auto policy in North Carolina, an insurance carrier that provides medpay can limit the coverage by looking to the exclusions under the medpay policy. The following common exclusions limit medpay benefits. The insurer is not required to pay medpay for any injury:
- sustained while occupying the covered auto while it is being used as a delivery vehicle or taxi (this exclusion does not apply to carpools)
- sustained while occupying any vehicle that is being used as a residence
- occurring while the injury victim was engaged in the business of selling, repairing, servicing, storing, or parking vehicles (this exclusion applies only if workers’ compensation is available to fund medical expenses for the crash victims)
- for injuries to victims other than the named insured and family members when riding in a taxi or other nonowned auto used to carry persons or property for a fee
- sustained while occupying any motorized vehicle having fewer than four wheels—While we have seen medpay on motorcycle policies in very rare instances, the sole source of medpay for a motorcycle rider would be the single policy covering that motorcycle only if the insurance carrier collected a premium and provided medpay for that specific two or three-wheeled motorcycle.
Example: Triple Payment of Medical Bills
Andy is riding with his friend John when Alice runs a red light and collides with their vehicle. Andy incurs $30,000.00 in medical expenses due to the accident. Andy has a private health insurance policy that he pays for himself that pays his medical expenses directly. This type of health insurance has no right of reimbursement in North Carolina. Other than small copays, Andy’s $30,000.00 in medical bills are paid entirely by health insurance. John’s car insurance provides $5,000.00 in medpay coverage. Andy has his own policy with $25,000.00 in medpay coverage. Even though medical bills were already paid by health insurance, Andy can collect $5,000.00 from John’s medpay policy and $25,000.00 from his own policy. These funds are his to keep. Andy can then present his claims against Alice (and her liability insurers) for personal injury and collect medical expenses, lost wages, and pain and suffering. Here, Andy collects another $30,000.00 for his medical expenses plus Alice’s insurer must also pay for Andy’s lost wages and pain and suffering.
Notice that Andy collects three times for his medical bills! He received $30,000.00 from medpay and $30,000.00 from Alice after his medical expenses were paid in full by his health insurance carrier. While statutory changes have limited the triple recoveries, there are still cases where triple recovery can occur and double recovery of medical expenses remains quite common.
Personal Injury Protection (PIP)
Some states’ insurance laws follow a no-fault scheme to provide benefits. In these states, PIP coverage behaves exactly like medical payments coverage. PIP is not underwritten on North Carolina policies. However, if you recently relocated from a no-fault state, your policy may have PIP. Also, if you were riding with an out-of-state guest who has PIP, this coverage would provide another payment source for your medical expenses. Some states’ PIP policies also provide benefits for lost income.
Some PIP policies do have subrogation rights. Unlike medpay coverage, the PIP policy may be reimbursed when you collect for your medical expenses through your claims against the at-fault driver’s liability insurance.
Rental Reimbursement Coverage
This is an optional addendum available on North Carolina policies. If another driver causes your accident, you should impose the cost of a rental vehicle on the at-fault driver’s liability policy. If fault is not yet determined, or if the collision was your fault, your rental reimbursement coverage will pay either $15.00 per day or $30.00 per day depending on the coverage you selected. If you do receive a rental under this portion of your policy, your collision coverage should apply to the rental vehicle so you would not be required to pay the additional cost of a collision damage waiver to the rental car company.
Accidental Death and Dismemberment
This is a rather rare addendum to North Carolina auto policies. If you have this coverage, you can collect stated amounts of cash benefits for certain types of specified injuries and in cases of fatal injury.