Let’s Talk Insurance
A ridiculously large number of drivers on the road do not have liability insurance. I have heard that 25% of drivers in California — one in four — drive around without liability insurance. This includes people that never had insurance at all, people who let their coverage lapse, people whose coverage gets cancelled because of non-payment of their premiums, etc. It does not matter why these drivers don’t carry liability insurance. The point is that if one of these uninsured drivers negligently causes you injury, you may be without a remedy unless you take the proper steps to protect yourself.
In order to protect against an uninsured driver, you must purchase Uninsured Motorist coverage for yourself. Simply put, Uninsured Motorist coverage is coverage that you purchase from your own insurance company that compensates you and your passengers for injuries caused by an uninsured motorist. In practice, making an Uninsured Motorist claim is as if you were making a third-party claim against the insurance company of the at-fault driver (if he/she had insurance). Just like a third-party claim, an Uninsured Motorist claim involves an adversarial process. Even though they are dealing with their own insured, the Uninsured Motorist insurance company will do its best to diminish and minimize the injury claim. For this reason, personal injury attorneys routinely handle Uninsured Motorist claims. One major difference between a third-party case and an Uninsured Motorist case, however, is in how the cases are litigated. There is no right to a jury trial in Uninsured Motorist cases. Rather, California statute mandates that Uninsured Motorist cases be arbitrated. Otherwise, the litigation is much the same as in “regular” third-party cases.
Uninsured Motorist coverage necessarily includes Underinsured Motorist coverage and is sold as Uninsured/Underinsured Motorist coverage. As its name suggests, Underinsured Motorist coverage protects someone who has been caused injury by a driver who has liability insurance but whose limits of coverage are insufficient to adequately compensate the injured party. Keep in mind that California state law requires that drivers carry a minimum of only $15,000/$30,000. Within the context of a motor vehicle crash, this means that the most the liability insurance company will pay to a claimant is $15,000 and the total they will pay to all claimants combined in an incident is $30,000. As such, Underinsured Motorist coverage complements the recovery from the at-fault motorist’s (insufficient) liability coverage. For example, let’s assume an injury case is valued at $50,000. Let’s have a relatively uncomplicated hypothetical and say that the at-fault driver is insured with the minimum limits required by law. In this scenario, (let’s say there are no other claimants) the injured party settles with the at-fault driver and collects the available $15,000 policy limits. The injured party then presents an Underinsured Motorist claim against her own insurance company for the difference between the full value of her case and what she recovered from the at-fault driver’ s insurance company: $50,000 less the $15,000 already recovered resulting in an Underinsured Motorist case valued at $35,000 “new money.”
Here’s a related concept. Pursuant to California law, your Underinsured Motorist insurance policy limits are credited against the recovery obtained from the third-party insurer. As such, you might be buying less insurance than you think. For example, let’s say you have purchased Uninsured/Underinsured Motorist coverage limits of $15,000/$30,000. You get into an accident and collect the at-fault driver’s liability policy limits of $15,000. You believe your case is worth $25,000, so you try to collect another $10,000 from your own company pursuant to your Underinsured Motorist coverage. But you will not succeed. Why? Because your Underinsured Motorist coverage ($15,000) gets a credit against what you recovered from the at-fault third party ($15,000). As such, there will be no Underinsured Motorist coverage available.