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November 15, 2016

Insurance Company Responsibilities in Uninsured/Underinsured Motorist Claims

Insurance Company Responsibilities in Uninsured/Underinsured Motorist Claims

Insurance Company Responsibilities in Uninsured/Underinsured Motorist ClaimsThis is the third article from Guy O. Kornblum on Uninsured/Underinsured Motorist Coverage (UM/UIM). He has discussed what it is, how it works and why you should have as much coverage as you can. As a reminder, it is our recommendation for primary policy limits of $300,000 per person and $500,000 per accident, and an excess policy above that which provides at least $1 million in additional coverage for UM/UIM. I also stressed that in order to qualify for this coverage you must purchase liability insurance (i.e. which protects you from suits by others resulting from your negligence) in the same amounts as the UM/UIM insurance that you want. Make sure you cover this with your agent when discussing your auto policy.

Insurance Company Responsibilities

Now let’s discuss how the insurance company must handle a UM/UIM claim once it is presented. First of all, there is an important point to recognize: UM/UIM coverage involves a claim made by an insured to its own insurance company. Thus it is that relationship, based on the insurance policy – a contract – that is at the heart of the claim. This results in a conflict between the insurer and the insured, as the insurer “steps into the shoes” of the negligent driver. If the insurer is contesting a claim it is going to argue a) that its own insured was totally or partially at fault for that insured’s injuries.

Nonetheless, the insurer must still handle the claim in “good faith” and not act unreasonably and arbitrarily. That is, as a first party claim (i.e. the insured is making a claim to its own insurance company), the insurance company has a legal obligation (i.e. duty) to comply with the covenant of good faith and fair dealing, which is implied (even though not expressly stated) in every insurance policy in California. This means that the insurer must comply with certain obligations, including not acting unreasonably in handling, evaluating the making a decision about the claim – i.e. whether to pay or not.

The Good Faith Obligation

As part of this “good faith” obligation, the insurance company must also comply with California’s Unfair Claims Practices Statute (Insurance Code §790.03(h)) and the accompanying regulations (10 California Code of Regulations 2695.1 et seq.) which regulate the conduct of insurers with respect to claims handling . For example, the insurer must “attempt to effectuate a prompt fair and equitable settlement after liability becomes reasonably clear.” (Cal. Ins. Code §790.03(h)(5).) It also must “diligently pursue a thorough, fair and objective investigation and shall not persist in seeking information not reasonably required for or material to the resolution of a claim dispute.” (10 Cal. Code Reg. 2695.7(d); emphasis added.). The insurance company has no choice. It is required to follow the “good faith” claims handling rules regarding their investigation, administration, and decisions regarding your claim.

When to Fight Back

If your insurance company violates these duties to you, you can sue and obtain money damages for what is owed you under your policy plus damages for your worry and anxiety and in some instances attorney fees. And, in the cases of malicious and fraudulent claims handling, your insurance company may be liable to you for punitive damages based on a civil fine which you receive to punish the company for its wrongful conduct. This “good faith” claims structure applies in cases of UM/UIM claims even though the insurance company’s responsibility is based on the question of the negligence of the third party driver who was not its insured – you are!

These “good faith” rules prohibit “low balling” (offering below value numbers in an effort to force you to accept this offer because you need the money), or unfair and unreasonable denials. When the insurance company does not live up to these rules, you have the right to seek a recovery against your insurer for failure to provide you – as the insured and purchaser of UM/UIM coverage – what the insurance company promised to pay you for the protection that you purchased?

Next: What Happens if the Insurance Company Denies Your Uninsured and Underinsured Motorist Claim? Pursuing Arbitration.

In addition to representing our clients, Mr. Kornblum also serves as an expert witness in insurance claims and legal malpractice claims, and as a mediator. For more information contact our San Francisco office at 415-440-7800.

October 17, 2016

What Happens When Motorists Don’t Have Insurance?

What Happens When Motorists Don't Have Insurance?

In our last post, we shared an an overview of what Uninsured/Underinsured Motorist Coverage (UM/UIM) is and why you should have it in your auto policy. Another staggering fact is that despite efforts by states to curb the number of uninsured motorists on the roads, the Insurance Research Council found 12.6 percent of drivers nationwide were driving without coverage in 2012, the last year for which data is available. All told, 29.7 million people were driving uninsured during that year nationwide.
How Much Coverage do you Need?
As a result, we recommend primary policy limits of at least $300,000 per person and $500,000 per accident, and an excess policy above that which provides at least $1 Million in additional coverage for UM/UIM. To obtain such, the insurer must offer this level of coverage and you must purchase the same amount of liability insurance coverage as you purchase for this UM/UIM insurance.
Making a Claim
There are certain requirements in making a UM/UIM claim under the governing statute, California Insurance Code §11580.2.
There are three classes of people who are covered by a vehicle policy with UM/UIM coverage. These include:
  1. The person named as the insured, his or her spouse, and his or her relatives while residents of the same household. Persons in this category are given the widest coverage. For example, they do not have to be riding in the insured vehicle at the time of the injury. If they are in a vehicle which is uninsured or underinsured that can qualify for coverage. They can even be injured as pedestrians and qualify for coverage.
  2. The second group includes any person in or upon or entering into or alighting from an insured motor vehicle. So the only question is if the vehicle is insured.
  3. The third group is more limited – any person who is entitled to recovery for care or loss of services because of bodily injury to which the policy provisions apply. This applies primarily to “loss of consortium” (damage to the relationship and loss of services) claimed by one spouses for injury to another.
There are three alternative means by which a claimant can preserve a UM/UIM claim (and thus not have it barred):
  1. File a complaint against the negligent driver (and owner of the vehicle if the driver is not the owner) within two years of the accident (this is the limitation period for filing in California).
  2. Conclude an agreement as to the amount to be paid for the UM/UIM claim with your insurance company.
  3. Submit a demand for arbitration to the insurance company by certified mail, return receipt requested within the two year period.
Hit and Run Coverage
There is also UM coverage for an accident resulting from a “hit and run” driver. Here there is only UM coverage because the offending vehicle has disappeared and there is no insurance available for that vehicle.
In order to qualify for this coverage there are three requirements:
  1. There must be “physical contact” between the “hit and run” vehicle and the insured vehicle (to avoid fraudulent claims).
  2. Within 24 hours of the accident, it must be reported to the police or sheriff.
  3. Within 30 days of the accident, a statement under oath must be provided to the insurance company setting forth the facts and circumstances of the claim.
Who is Protected?
Remember, UM/UIM coverage protects you, the occupants of your car, and insured family members who are residing with you if any of them is a victim of an accident by a motorist who carries no liability insurance (i.e. insurance who provides coverage for claims by third parties) or the amount of liability insurance coverage is less than the amount of UM/UIM coverage you have.
How it Works
So, again (I gave a different example last issue) here is how this coverage might work as underinsured motorist coverage.
You and two family members are hit by a vehicle being driven negligently and suffer injuries. The negligent driver has liability coverage of $100,000/$300,000. There is no additional insurance – i.e. excess or umbrella coverage for that driver. You have primary coverage of $300,000/$500,000. Thus the amount of liability insurance protection for the negligent driver is less than the UM/UIM coverage you have.
There are three claims against the negligent driver. The most his insurance company will pay is $100,000 per claim, and $300,000 total for all claims. You have more protection under your UM/UIM coverage: There is an additional $200,000 per person under your primary policy UM/UIM coverage ($300,000 limits minus the $100,000 liability limits of the negligent driver’s policy), subject to the $500,000 per occurrence (i.e. accident) limits as reduced by the total of payments made under the driver’s policy (if $300,000 is paid out, there would be only $200,000 left in the aggregate of your primary policy) plus the $1 Million additional coverage applied to all claims under your UM/UIM excess coverage. So there is more insurance money available for these claims.
As noted, if the negligent driver is not insured (or it is a “hit and run” accident that qualifies as noted above), then the entire amount of your UM/UIM coverage is available to pay for the claims arising out of the accident.
Which Coverage to Buy
As a general rule the cost of this additional insurance protection for you and your car’s occupants, those family members who are residing with you is normally not that great. But in order to qualify for this coverage you must purchase liability insurance (i.e. which protects you from suits by others resulting from your negligence) in the same amounts as the UM/UIM insurance that you want.
Make sure you cover this with your agent or broker when discussing your auto insurance.
Next: The Uninsured/Underinsured Motorist Claim: What are the Insurance Company’s Responsibilities in Handling the Claim? 
 
In addition to representing our clients, Mr. Kornblum also serves as an expert witness in insurance claims and legal malpractice claims (www.jurispro.com), and as a mediator (www.kornblummediations.com). For more information, please  contact our San Francisco office at 415-440-7800.