Underinsured Motorist Insurance (UIM)
What is Underinsured Motorist (UIM) coverage?
What is the difference between a first-party insurance claim and a third-party insurance claim?
What are some pitfalls associated with UIM claims?
How long do I have to bring a UIM action?
I was riding in somebody else's car when we were hit by a drunk driver. I have a UIM policy of my own and my driver does as well. Which one applies to me?
Can I resolve the tort claim and the UIM contract claim in the same action?
What is Underinsured Motorist (UIM) coverage?
UIM coverage is purchased by you or the owner of the vehicle you are riding in to further compensate you if you are injured by someone who doesn't carry enough liability coverage to fully repay you for the damage they cause. After you have collected from the at-fault driver's insurance following a personal injury accident, you can pursue a contract claim to collect further compensation from the UIM policy.
What is the difference between a first-party insurance claim and a third-party insurance claim?
They are similar. Both require you to prove the same elements of your case. If you go to trial on either claim, the trials will involve similar witness, expert and medical testimony regarding your injuries and harms.
There are some substantial differences, however, in the sense that a third-party claim is a tort action while a first-party claim centers around an insurance contract. In the third-party (tort) action, you need to file suit against the individuals that are responsible for your harms. This is true even though an insurance company is likely to exist behind the scenes, paying the defense lawyer, ready to step in and pay any judgment on the defendant's behalf. The insurance company is a secret during the trial that nobody mentions or refers to. But in a third-party action, the insurer has duties to act in good faith and to protect the person who hurt you by attempting to minimize the risk that you would obtain a judgment in excess of the insurance policy limits. This threat of an excess verdict is the main difference between first-party and third-party claims. It is a very rare situation when an insurance company acts in bad faith at all, but if it fails to act in good faith in the tort case, resulting in a large verdict against its insured beyond the limits of the policy, the insurance company could theoretically be forced to pay the whole judgment.
In a first-party (contract) action, the case looks a little different in that you would file suit against the UIM insurance company for breaching the contract to pay the damages caused by this other person. So the case would be you against your insurance company. The presence of insurance is no secret during that action even though the amount you are due under the contract is determined by the same tort case issues that would be addressed in the third-party claim. For the most part, the most you can recover on a UIM claim is the policy limit. There is no excess verdict potential under most circumstances. Minnesota law has now added a duty on the part of first-party insurers to act in good faith so you can now amend your UIM claim to include a bad faith claim to possibly recover beyond the policy limits if permitted by the court. This cause of action differs from the third-party bad faith action both in form and the amount you would be permitted to recover in excess of the policy after a verdict. Talk to an experienced lawyer to understand how bad faith claims work.
What are some pitfalls associated with UIM claims?
One major pitfall for the inexperienced is that a UIM claim can be forfeited by failing to properly notify your UIM insurer of your pending settlement with the at-fault driver's insurance company.
UIM insurers, when they pay injured people benefits following a car accident, have a right of subrogation against the people responsible for hurting you. Subrogation is legal authority to step into your shoes and make a claim for your damages, even if you choose not to. Medical insurance companies also have this right when they incur costs on your behalf. When you settle a liability case with the at-fault driver's insurance company, they give you compensation in exchange for signing a release. The release says, in so many words, that you will no be able to sue anybody for hurting you. This obviously destroys your ability to make a claim against the person who hurt you, but it also destroys the insurance companies right to subrogate. Because the insurance company cannot step into your shoes anymore, they have no claim and the suffer prejudice. So a UIM company could be upset that you took compensation to its detriment.
The Minnesota Supreme Court has a system in place that allows you to preserve your UIM claim while still getting compensation from the liability claim. You need to properly notify the UIM insurance company of your pending settlement, giving it an opportunity to substitute its payment to you in lieu of the the at-fault driver's payment. Failing to do so can completely forfeit your right to bring a UIM claim down the road. Speak to an experienced attorney about these issues and how they relate to your specific situation.
How long do I have to bring a UIM action?
The short answer is 6 years. A UIM claim is a contract claim and the statute of limitations in Minnesota for contract claims is six years. The next question is obviously, "6 years from when?" If a case against the liability carrier settles, Minnesota courts have recently held that the UIM action is ripe when the claimant receives notice that the UIM carrier did not elect to substitute its check pursuant to Schmidt v. Clothier. You will have six years from the date you receive that notice.
Statutes of limitation are very serious because they can completely bar your claim forever if you do not follow the proper procedure to preserve your claim. Go over your case with an experienced attorney to understand the statute of limitations and how it relates to your situation.
I was riding in somebody else's car when we were hit by a drunk driver. I have a UIM policy of my own and my driver does as well. Which one applies to me?
The first layer of UIM coverage is going to be whatever policy covers the occupied vehicle. Your own policy will be likely to step in to be excess UIM coverage for you. This excess coverage differs from third-party excess coverage in that the policies are not added together to determine the amount of insurance, rather, the primary UIM insurance limits are subtracted from the excess UIM limits. So if your driver carried a policy with a limit of $50,000 and yours has a limit of $100,000, you would first look to the $50,000 from your driver's policy then have only $50,000 of the $100,000 remaining of coverage on your own UIM policy. If your UIM limits are less than your driver's UIM limits, you have no excess UIM coverage.
In cases where you might be insured under multiple UIM policies, it is extremely important to discuss your case with an experienced personal injury lawyer. Sometimes you might be a named insured under a UIM policy with very high limits but it would not be available in your case. Discuss the matter with an attorney.
Can I resolve the tort claim and the UIM contract claim in the same action?
Yes. If the lawsuit is started against the at-fault driver, you will notify your UIM insurer pursuant to Malmin v. Minnesota Mut. Fire & Cas. Co., 552 NW 2d 723 (Minn. 1996). The UIM company will have the option to intervene in the lawsuit, but even if it chooses not to, and you reach a verdict, then you can collect the applicable portion of the judgment from the UIM policy.