What Exactly does Insurance Cover? Maybe More than you Think

November 24th, 2010. By janem

Understanding the intricacies of vehicle insurance puts my brain into a fog. Fortunately, James Bedard, someone I recently interviewed regarding his legal malpractice complaint, shares some insight. “I wonder how many people suffer financially because they are not aware of what coverage they have,” says James, “and the insurance company sure isn’t telling them.” (Unfortunately, James lost his case but he isn’t giving up.)

James Bedard: Insurance can be very confusing and I think that most people do not understand what they do have in coverage.

Under many state laws, there are two types of insurance coverage.

• Uninsured (UM) means the other party has no insurance so you have to carry that UM insurance yourself.
• Underinsured (UIM) means you don’t have enough insurance.

For instance, if someone hits me and they only have minimum insurance (that the state requires), but my injuries exceed that amount, I can claim my own coverage for the difference. In 2001, someone ran a red light and I was injured. He only had $50,000 coverage but I had $1 million coverage on my truck; I was able to collect $50,000 from his insurance company and my attorney filed a claim with my employer’s insurance company for $950,000.

UM and UIM Coverage

Most every state makes it mandatory for everyone to have UM and UIM coverage. So every driver is covered if they are in an accident caused by a driver who is either not insured or doesn’t have enough insurance.

As well, most states require that you have to have the minimum coverage of $25,000/50,000/10,000, which means $25,000 for injury to one person, $50,000 for two or more people and $10,000 for property damage, e.g., car, house, etc.

When you take out your coverage it is automatic that your coverage for uninsured (UM) and underinsured (UIM) is the same. So if a person who hits you has no insurance, you are covered for the $25,000/50,000/10,000.

Say your coverage is $100,000/300,000/100,000 and you are hit by a person who only has the 25,000/50,000/10,000; your car was totaled and it was worth 50,000 dollars. You could collect the $10,000 for property damage from the other party’s insurance and fall back on your insurance for up to $90,000, which is the difference. And your car would be totally covered.

On the other hand, say you had the same coverage as the party that caused the accident. All you would receive is their $10,000 because there is no difference from your insurance policy and their policy.

It seems complicated but it really is quite simple. Most States allow a person to reject the higher UM and UIM coverage and lower it to the minimum coverage.

For example, the 100,000/300,000/100,000 coverage I had meant that the UM and UIM coverage was the same. But you could save a few dollars and reject that coverage and reduce it to 25,000/50,000/10,000. So if you hit someone they would be covered for the higher amount but if they hit you and were not insured, you could only fall back on the 25,000/50,000/10,000.

Why anyone would want to insure themselves and their family for less then the general public makes no sense–because you don’t save that much.

Insurance Incidents

My friend asked me how she was going to get her car fixed, because the person who hit her had no insurance and did not have anything to sue for. I told her to call her agent and file a UM claim. She said her coverage was $25,000/50,000/10,000 and I told her the last figure of $10,000 was for property damage–the maximum she could recover for her car. She called me later and thanked me.

My son’s friend got his hand caught in another friend’s car door and he could not use his hand for work. He worried how he was going to pay his bills. I told him to call his agent and tell him he wanted to file a Personal Injury Protection (PIP) claim, which is mandatory in most states. He called me later and thanked me–he was getting $900

a month for lost wages and up to $4500 for medical expenses.

A little girl and her mother were recently in a car accident. She was worried that her personal insurance wouldn’t cover the accident and pay her bills. Again, I told her to contact her agent and file a liability claim for their injuries and the PIP for her lost wages. Her little girl would suffer permanent facial scars and I told her not to settle for less then her maximum coverage, which was $25,000. She received all of it.

Truck vs Automobile and State vs Federal Claim

Most states also have statutes that define the words used in the statutes. For example, Kansas statute 40-284 establishes what your ” Automobile Liability ” insurance will be for the UM and UIM

State statute 40-298 and statute 8-126(x) define an ” Automobile ” as a passenger vehicle designed primarily to carry 10 or fewer passengers, which is not used as a truck.

Statute 40-284 also mentions a ” Motor Vehicle ” State statute 40-276 defines ” Motor Vehicle ” as in statute 40-284 to mean a vehicle of a passenger or station wagon type, that is not used as a public livery conveyance for passengers, not rented to others and any four wheel motor vehicle with a load capacity of one thousand five hundred pounds (1,500) or less, which is not used in the occupation or business of the named insured.

This makes it very clear that statute 40-284(c), which is used to reject and reduce the UM and UIM coverage, is not meant for trucks or any vehicle or truck used in the occupation or business of the person, who is insured. This statute is for cars driven by the citizens of the State of Kansas.

But insurance companies use this statute to reject and reduce the coverage on large trucks, used in the business of the named insured. As you can clearly read, that is not allowed. The definitions I have given you above are the exact definition of those statutes and every State has a similar statute.

You would not believe how many cases are lost to the insurance companies, simply because attorneys do not know the regulations/laws of the FMCSA and the PHMSA.

In my research I found a case where a driver had his little girl with him and a pickup caused the truck to crash. The little girl had injuries over $200,000 and their attorney filed a State UIM claim because the pickup did not have enough insurance coverage.

When they filed on the truck insurance, the insurance company came up with a rejection to the coverage and reducing it to $50,000. So they got nothing.

I researched the case and could find no rejection besides the form the insurance company submitted. I also found that the little girl was covered under the public liability of the truck. I even confirmed it with the Federal Motor Carrier Safety Administration (FMCSA). So she should have been covered for up to $1million coverage.

But because their attorney did not know the FMCSA regulations that the truck was under and then filed a State UIM claim (it should have been a federal claim), they lost the case. Unfortunately, when I checked it out, the statute of limitations had run out on their case. So it was all over, insurance company wins.

What You Can Do

Clearly, it is up to you, the insurer, to be pro-active. Not all insurance companies are created equally and not all insurance companies act in your best interest. It’s worth the time to study your insurance coverage and get good legal advice before you file a claim. And please take James’s advice: ” Always ask your attorney why he does or doesn’t do this or that…”

Tags: Car Accident, Car Insurance, Insurance

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