Underinsured Motorist Claims
Underinsured motorist (UIM) cases are similar to UM claims. Stacking rules are the same, and thus victims can collect benefits under multiple policies by looking first to the vehicle they were riding in and then to all personal auto insurance policies and all policies for all family members who resided with them on the date of loss.
UIM is different from UM in that the at-fault vehicle and/or driver will have some measure of liability insurance to cover the victim’s damages. Although the at-fault party is insured, he or she would be “underinsured” if the total limits of all available liability policies is less that the total limits of all available and stackable UIM policies.
See chapter 1 for an explanation of how UIM coverage is stacked and utilized. In all UIM cases, the victim should be very careful to search for and identify all liability policies. If an excess liability policy is not identified, the UIM carriers will discover the additional liability coverage and then legally reduce or eliminate available UIM benefits. Also, it is imperative to locate all UIM policies before settlement. Failure to identify a UIM carrier may reduce the total coverage and payments available to the victim.
Similar to UM cases, a UIM claim can be arbitrated if the victim and all insurers cannot agree to a private settlement. One very unique aspect to a UIM claim is the ability to split the claim into a two-stage settlement. If liability coverage limits have been offered and “tendered” (meaning that the money is made available to the victim), the victim now has the right to open and present a claim for UIM benefits. Under North Carolina law, adjusters for all stackable UIM insurance policies must be notified of the liability tender offer. Once they receive notice of the liability coverage limit offer, they have thirty days from that point to determine whether they intend to subrogate against the at-fault driver and all other parties who caused injury to the UIM insured.
Through a subrogation claim, the UIM insurance carrier stands in the shoes of the insured victim and they have a right to pursue reimbursement of their UIM claims payments by bringing claims against the parties who caused the auto accident. The UIM insurance carrier can file suit, bring the auto accident case through a trial, and secure a verdict and legal judgment against all parties who caused the injury that is the subject of the UIM claim. For example, if an at-fault driver carries just $30,000.00 in bodily injury liability coverage and this amount is offered to the victim, and if the victim has serious injury claims and UIM coverage of $100,000.00 available under his or her own policy, the UIM carrier faces up to $70,000.00 in financial exposure (the at-fault driver was underinsured by $70,000.00, which is the difference between the total UIM coverage available and the total liability coverage available for that collision). If the UIM insurer pays the full $70,000.00 to the insured victim, they have the legal right to sue the at-fault driver and collect the $70,000.00 that they paid.
Our laws allow the victim to split their claim into two parts and reach the liability limits early. This effectively eliminates the UIM carrier’s ability to hold up the liability settlement and coerce the victim/insured to accept a lesser UIM settlement just so they can collect the first layer of payment benefits from the liability policy. In practice, the victim notifies the UIM carrier of the liability limits offer. During the next thirty days, the UIM carrier will perform an asset search to see if the at-fault driver owns real estate or has other wealth worth pursuing. If the at-fault driver has no apparent wealth, the UIM carrier will waive subrogation by allowing the thirty-day time clock to pass without taking any action. If the UIM carrier intends to preserve their right to seek reimbursement from any at-fault party, they must pay the total amount offered by the liability insurance to the insured victim. This payment is called a UIM advance payment. The UIM advance payment provides the early payment of liability coverage limits to the victim while, at the same time, precluding the victim from signing any documents or reaching any agreement with the liability insurance carrier.
In most cases, the UIM insurer will choose not to pursue reimbursement from the at-fault parties and they will waive their subrogation rights. Once this occurs, the victim can collect the liability coverage limits directly from the liability insurance carrier. However, to collect the liability benefits early, the victim must forfeit the right to pursue the personal wealth and assets of the at-fault driver. Thus, the victim should perform his or her own asset search to identify wealth and assets for all at-fault parties, and the victim must also identify all UIM policies to calculate the total amount of UIM benefits available. If the total of all UIM benefits would not fully compensate the victim and if the at-fault parties own real estate, stocks, bonds, or other assets, it would be a mistake to settle the liability claim early with the liability carrier. They will only agree to the early payment if the victim signs a covenant not to enforce judgment. Thus, they only pay the liability limits if the victim agrees that he or she can never pursue the at-fault driver for payment of any verdict or judgment that exceeds all available UIM policies. Fortunately, if the at-fault parties do have meaningful wealth worth pursuing, the UIM carrier likely would pay the UIM advance payment thereby allowing the victim to enjoy the benefit of the early payment and the two-stage settlement allowed under North Carolina law.
The laws relating to stacking of UIM and the split settlement with liability and UIM coverage are quite complex. If you are dealing with a serious injury case involving an offer of full liability coverage limits, it is wise to secure a consultation with an insurance coverage lawyer to make sure that all of your financial options are clearly understood. Even if you must pay for the legal consultation, you will have peace of mind knowing that all layers of available insurance funding are carefully preserved for your benefit. Insurance carriers are only concerned with closing their claim file, and they will not help you to protect your rights or preserve the ability to collect additional coverage that is outside of their policy.