(October 2019)
All states where
uninsured motorist coverage is mandatory require bodily injury coverage, but
some states also require property damage coverage. This analysis is based on
only the bodily injury coverage.
All terms and conditions
of the coverage form to which any endorsement attaches apply unless the
endorsement itself provides otherwise.
Uninsured and
underinsured motorists coverage may be provided together on one endorsement or
separately on two different endorsements. Some states require offering both coverages.
Others require offering only uninsured motorists coverage. Options for
rejecting coverage are available in some states.
Related Article:
Auto Uninsured/Underinsured Motorists Coverage Requirements
State-specific
endorsements must be used because there is no generic endorsement. Every state that
has passed laws mandating coverage also mandate the terms under which the
coverage must exit.
This general analysis is
very basic because there are significant differences in state endorsements, so
it is important to consult the endorsement for the applicable state.
Uninsured motorists coverage pays the insured when the owner or the
driver of the vehicle that damages the insured is legally responsible for the
insured's damages but has no insurance coverage for the accident.
Underinsured motorists coverage pays the insured when the owner or
the driver of the vehicle that damages the insured is legally responsible for
the insured's damages has insurance coverage, but the limits are insufficient
to pay the value of the injury or damage sustained.
There are two different
definitions of insured. One applies when the named insured is an individual.
The other applies to any other type of named insured.
In the case of an
individual named insured, that person and all family members are insureds.
Family members reside in the named insured’s residence and are related through blood, marriage, or adoption. This also
includes wards or foster children. In
addition, most students who live on campus are also considered insureds.
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Example: Jerry Electric's autos are insured by a Business Auto
Coverage Form. Jerry is also an individual named insured. All of the autos in
his household may be used for business purposes at any time. Patrick, Jerry's
son, attends the University of Kentucky, lives on campus, and returns home
during spring and summer breaks. However, he does not have a car. A
hit-and-run driver strikes Patrick as he walks through downtown Lexington. He
recovers but incurs significant medical
bills. Patrick is an insured because Jerry is named as an individual and
uninsured motorists coverage is provided. As a result, Jerry’s Electric's
Business Auto Coverage Form pays Patrick’s medical bills, subject to the
uninsured motorists limit of insurance. |
The next two sections of
the definition of Who Is an Insured refer to all named insured entities,
including individuals.
1. Anyone in or on
a covered auto or in or on a substitute auto for a covered auto is an insured.
Substitute autos cannot be replacement autos. They are temporary substitutes
needed because a covered auto is either damaged or otherwise temporarily
unavailable.
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Example: Harley drives a company auto. He takes it in for repairs
and obtains a loaner auto to use until the repairs are completed. On his way
to pick up his vehicle, he spots a friend walking down the road, pulls over,
and offers him a ride. Another auto driven by a 15-year old uninsured boy
strikes the rear of the loaner auto as his friend is getting in. In this
case, the uninsured motorists coverage under his employer’s Business Auto Coverage Form covers the injuries Harley
and his friend sustained. |
2. Anyone damaged
because of bodily injuries to another insured is also an insured.
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Example: Harley’s wife depends on him for almost everything due
to her serious illness. He does all the cooking and cleaning, in addition to
taking her to her medical appointments and providing light nursing care.
Harley is unable to provide any of these services for three months after the
accident. Harley’s wife can seek payment for her damages through the
uninsured motorists coverage for the services she needs. |
This specific Exclusions
section replaces the Exclusions section in the coverage form.
There is no coverage for:
1. Settlements
that take place without the insurance company's prior knowledge and consent.
This may or may not apply to underinsurance claims.
Note: This is
logical. Negotiations are much easier between parties that do not have to pay
any of the cost. The party required to pay should be involved in the
negotiations concerning such payments.
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Example: George Anderson is insured with the ABC Insurance
Company. Cary Farmer, who is uninsured, strikes him. George sustains major
injuries and sues Cary without notifying ABC. George and Cary reach an
arbitration agreement for $150,000. Because Cary is uninsured and is without
assets, George turns to ABC to collect. ABC refuses to honor the judgment because
it was not involved in the arbitration proceedings. |
2. Injuries paid
under workers compensation, disability benefits, or similar laws
3. Any time a
vehicle is used without permission or without a reasonable belief that the
insured can use the vehicle.
Note: This can be
a difficult issue to decide and many court cases involve these situations.
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Example: A father gives his son permission to drive a company
owned vehicle to a party. While at the party, the son drinks too much and is
unable to drive home. The son’s sober friend drives him home but is involved
in an accident on the way. The father did not give permission to his son's
friend and the son did not have the authority or the capacity to give
permission. However, would the father or his company want the son to drive
home inebriated? Was the son's friend reasonably sure he would have had
permission to drive the car, based on the specific situation? |
4. Any punitive
damages or exemplary damages.
Note: Punitive
damages are intended to punish the wrongdoer, not reward the victim. Punitive
damage awards paid under uninsured or underinsured motorist coverage do not
punish the wrongdoer at all since they do not cost the wrongdoer anything.
5. Bodily injury
for any of the following when the named insured is an individual:
·
If the named insured is in a vehicle that he or
she owns that is not insured under this specific coverage form or policy
·
If a family member is in a vehicle it owns that
is not covered under this specific coverage form or policy
·
If a family member is in a vehicle the named
insured owns that is not insured under this specific coverage form or policy
Note:
For full coverage, all vehicles the named insured and all family members
own should be insured under the same coverage form or policy.
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Example: Melody operates a beauty shop in her own name as an
individual and insures all her vehicles
under one Business Auto Coverage Form. She takes Angela, her 17-year-old daughter, car shopping. Angela
finds the perfect car, buys it, and decides to drive it home. The drive home
ends abruptly when an uninsured van runs a red light and T-bones Angela's new
car. Because neither Angela nor Melody told their insurance agent about the
new car purchase, there was no coverage on the vehicle at the time of the
accident and no uninsured motorists coverage for Angela. |
6. Bodily injury due to
any type of war, warlike behavior, or insurrection.
The each accident limit
on the declarations is the most paid, regardless of the number of individuals
making claims for the same accident. Any payment made is reduced by any payment
from Workers Compensation and any other source from persons legally responsible
for the accident.
Note: Duplicate
payments of any kind are not permitted.
Three conditions are changed,
and one is added. All other conditions are unaffected.
1. Other Insurance
This endorsement changes
this condition. Uninsured motorists coverage to an individual is occasionally
available from more than one source. In such cases, it is necessary to
determine the order of response. This section provides instructions for making
that determination:
With this approach, one
coverage form or policy is primary, and all others are excess. In addition, the
coverage forms or policies cover on a proportional basis with other available
coverage. In order to prevent stacking limits in such cases, the total limit
available is the highest limit of insurance provided.
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Example: Doug and his sons, Keith and Colin, are traveling with
his nephew Stephen in a vehicle Stephen’s father owns. The vehicle is insured
under Stephen's father’s Business Auto Coverage Form. An uninsured driver
strikes the vehicle, and everyone is seriously injured. The $300,000
uninsured motorist’s limit of insurance on Stephen’s father's Business Auto
Coverage Form is quickly used up. Doug also has a Business Auto Coverage Form
with a $1,000,000 limit. His coverage form responds to his injuries, as well
as Keith's and Colin's. $1,000,000 is the most paid under Doug’s coverage
form, less any amounts paid by Stephens’ father’s company’s coverage form for
Doug's, Keith’s and Colin’s injuries. |
2. Duties In The Event Of Accident, Claim, Suit or Loss
UM/UIM endorsements sometimes
change this condition. In addition to the duties in the coverage form or
policy, the insured must notify the insurance company promptly of any hit and
run incidents and send it copies of all legal papers if a suit is brought.
Additional duties may also apply, depending on the state.
3. Transfer of Rights of Recovery Against Others to Us
This condition
supplements the same condition in the coverage form or policy. It requires that
any amounts recovered from the uninsured/underinsured motorist be held in trust
for the insurance company as a repayment.
Note: This
prevents an insured from being enriched by an accident instead of being
indemnified.
4. Arbitration
This condition is added
and applies only to UM/UIM coverage. It provides a means for the insured and
the insurance company to resolve differences without involving litigation. When
neither can agree on whether the insured is legally entitled to receive payment
for damages, or if they disagree on the amount
of damages, either party may request arbitration, but both must agree to
it. Each selects an arbitrator and the two arbitrators select a third. If an
agreement is not reached by the end of 30 days, either can request that a judge
makes the final decision. Any decision
reached is binding on all parties. Each side pays its own arbitrator. They
share all other expenses, including the cost of the third arbitrator.
Note: This is very important because it prevents the insured from
having to sue its own insurance carrier.
Four new definitions are
added that apply only to uninsured and underinsured motorists coverage.
Family member
This term is used when the named insured is an individual. A
family member includes everyone residing in the named insured's household
related by blood, marriage, or adoption, including wards and foster children.
Note: It is
important to understand that some household residents may not be relatives as
indicated and are therefore not covered. In addition, some relatives eligible
for coverage may not be covered because they do not reside in the household.
Occupying
This term describes what a person must do to be covered. Occupying
includes being in or on the vehicle. It also includes entering, exiting, or
getting off a vehicle, such as climbing down from a pickup truck bed. Proximity
to a vehicle affects coverage. A person who jumps off the top of an auto and is
struck by an uninsured auto before landing may be covered. A person struck
after walking 20 feet from a vehicle may not be covered.
Uninsured motor vehicle
This term means a vehicle or trailer that is not covered by a
liability bond or an insurance coverage form or policy. The vehicle may not be
covered because coverage was not purchased, or it may be not covered because it
was purchased but the insurance company denies coverage or is insolvent.
A hit and run event is
considered an uninsured motorist situation. A vehicle is not required to
actually physically strike the insured, but it must inflict damage in such a
way that can the damage can be supported by evidence and witnesses to have been
caused by that vehicle.
A self-insured vehicle,
government vehicle, or off-road vehicle is not considered an uninsured motor
vehicle except under unusual circumstances.
Underinsured motor vehicle
This term means a vehicle or trailer with limits less than the amount
of insured's underinsured limits carried or the limits carried have been
reduced due to other payments made to settle other claims due to the same
accident.
Note: A
self-insured vehicle, government vehicle, or off-road vehicle is not considered
an underinsured or an insured motor vehicle. In addition, any vehicle covered
under the insured’s coverage form or policy is not an underinsured vehicle.
Uninsured and
underinsured motorists coverage is difficult to underwrite as a separate coverage.
This coverage is mandatory in most states, but limits are optional. Insureds
should be encouraged to carry limits equal to their own bodily injury limits
because many drivers carry either no insurance or only the statutorily mandated
minimum limits required to meet that state's financial responsibility laws.