UNDERINSURED MOTORIST INSURANCE
What is it?
by
Attorney Steve Olson
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP
Uninsured Motorist insurance is the topic in a companion article. As a follow-up, this article discusses a similar type of insurance, Underinsured Motorist protection.
In the article on Uninsured Motorist insurance, we used the example of an auto driver without liability insurance who pulled out in front of you, causing a crash. Let's change that to discuss Underinsured Motorist insurance. Assume the auto driver who pulled out in front of you has liability insurance, however, his limits are only $25,000 per person and $50,000 for everyone injured in an accident. You and your passenger are both seriously injured. The most either of you can collect from the auto driver's insurance is $25,000, yet, you alone have $30,000 in medical bills (an MRI can cost more than $3,000). If you carried Underinsured Motorist protection, you could make a claim against your own policy for the difference between the limits the other driver had and your own limits.
You must be extremely careful in selecting Underinsured Motorist policy limits. Underinsured policies will have what is known as a 'reducing clause'. Reducing clauses, which the Wisconsin legislature expressly approves, dictate that the amount your Underinsured policy will pay is reduced by the amount that the underinsured driver's liability policy pays. This means you can never collect the full amount of underinsured insurance you bought. For example, assume you have Underinsured policy limits of $50,000 per person and $100,000 per accident. The underinsured driver had $25,000 - $50,000 limits. For your injuries, you could collect $25,000 from the underinsured driver's liability insurance policy, but only an additional $25,000 from your own Underinsured motorist policy. Your passenger, who is covered by your policy, can collect the same amounts as you from both policies. The sum of payments from all sources can never exceed the Underinsured motorist policy limits you have selected.
Another reason you must have high underinsured policy limits is due to definitions likely contained within the policy itself. An underinsured vehicle will likely be defined as a vehicle carrying liability limits less than your underinsured policy limits. Your Underinsured policy will pay nothing when the limits are identical. A recent client of mine provides a tragic example. My client, with two passengers in his auto, was waiting at a rural intersection for traffic to clear so he could turn left. He had his left blinker on. He was rear-ended at highway speed by a truck. His neck was broken, putting him in a metal halo device surgically implanted in his skull for months. His passengers were also seriously injured, requiring short-term nursing home care. Altogether, the three had medical bills exceeding $150,000. The truck had liability insurance limits of $50,000 per person and $100,000 per accident. Unfortunately, my client had the same Uninsured and Underinsured policy limits. The only insurance coverage available was the $100,000 from the truck's liability policy. My client's insurance company paid nothing. Why? Due to definitions: 1) the truck was not 'uninsured' so neither my client nor his passengers could make a claim against his uninsured policy; and 2) the truck was not an 'underinsured' motor vehicle since the truck's liability limits were not less than my client's Underinsured motorist policy. Don't let this happen to you. Make sure your Uninsured and Underinsured policy limits are high enough. Both Uninsured and Underinsured motorist insurance premiums, in the big scheme of things, are fairly low-cost, particularly when compared with collision or liability insurance.
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP