First of all, what is “uninsured motorist insurance”, or UM, coverage? For that matter, what is “underinsured motorist”, or UIM, coverage?
Uninsured, or UM coverage provides insurance coverage, if you are unlucky enough to have an accident with an uninsured motorist. Your own UM coverage will help compensate you for your injuries, if the negligent motorist who injured you, had no insurance.
Underinsured, or UIM coverage, will provide you with coverage, in the event the negligent motorist who injures you, had insurance, but not enough to compensate you. Your UIM coverage will pay up to the difference between your UIM policy limits, and the negligent motorist’s inadequate insurance policy.
Let’s look at a couple of examples, to see how these two types of optional coverages work:
You have accident with an uninsured motorist. You have a $50,000.00 UM policy limit. Your insurance company may be liable to pay you up to $50,000.00 for your injuries.
You have accident with a motorist, who has the smallest policy allowed by Michigan law, a so-called “20/40” policy, which means it will pay up to $20,000.00 to any one accident victim, and up to $40,000.00 per accident.
You have injuries reasonably worth well in excess of $100,000.00, but you only have a UM policy limit of $20,000.00. You are eligible for NO benefits under your uninsured/UM policy, because the negligent or “at-fault” driver had insurance.
You have accident with a motorist, whose “50/100” policy ($50,000.00 to any one accident victim, and up to $100,000.00 per accident) is insufficient to compensate you for injuries that are reasonably worth $1 million. You have UIM policy limits of “100/300” (you guessed it!! $100,000.00 to any one accident victim, $300,000.00 maximum per accident).
You are entitled to a maximum of only $50,000.00 in UIM benefits, because under existing (horrific and unfair) Michigan appellate decisions, which have the force of law, you are entitled only to the difference of your UIM limits, minus the inadequate policy limits of the at-fault driver. $50,000.00. Not $1 million, or $950,000.00. I will shortly be posting about some of the most shameful appellate court decisions over the past 10-15 years.
You have accident with a motorist, who has only the minimal 20/40 limits, which are offered to you. Thinking you were going to save on your insurance premiums, you bought only a 20/40 UIM policy. What does your insurance company owe you in this situation?
Nothing. Zero. Zip. Nada.
Insurance companies routinely sell underinsured motorist policies for the minimal 20/40 limits, knowing that it is highly likely, that they will never have to pay you on that policy.
Think about it. UIM coverage only kicks in, when the at-fault driver has insurance. So, whatever level of insurance the other driver has, the 20/40 UIM policy that you were charged good money for, will never have to pay you a dime. Go ask your agent, the next time you are in his/her office, why this is not fraudulent, or dishonest. Obviously you need to make sure your UIM limits are well in excess of the minimal 20/40 limits.
Why Is UM and UIM Coverage So Important?
You may have noticed that I referred to UM and UIM coverage as “optional”. Because it is optional, you do not have to buy this coverage, although it would be unwise and short-sighted to not buy this coverage.
It costs money, although if you look at your insurance policy “declaration page”, or “dec sheet”, you may notice that it costs less for every thousand dollars of coverage. We buy meat by the pound, milk by the gallon; similarly, insurance is priced on a “dollars per thousand” basis. Look at your policy; the UM and UIM coverages cost less on a “dollars per thousand” basis, than does the normal bodily injury policy. Why? Because there are fewer UM and UIM claims, than there are bodily injury claims, against at-fault drivers.
Why pay this money, if you do not have to? That depends on your answer to the following questions: Who is most important to you in this world? Is it your loved ones? Your family members? Or is it the complete stranger, you happened to rear-end, when traffic suddenly backed up in front of you? The “bodily injury” limits we are all familiar with, pay the complete stranger, when we are the negligent party. UM and UIM pay benefits to you, loved ones, etc.
It is easy to understand why we should all have uninsured motorist coverage, particularly when we hear how many uninsured motorists there are in Michigan, particularly in our State’s urban areas.
What about underinsured, or UIM coverage? Why buy it, if you can save a few dollars? Let’s look at two cases, that show in a blunt and heartbreaking way, why you need UIM coverage.
In the first of these two cases, Billy is a 26 year-old Union welder/pipefitter (no, “Billy” is not his real name), whose accident occurred when the negligent at-fault driver spun out of control in front of him, on a rainy Detroit area freeway. The accident injured Billy’s left wrist so badly, that after three surgeries, and multiple steroid injections, his own doctors gave up, and told him he could never work again as a welder/pipefitter. In fact, the DME doctors to whom Billy was sent by the insurance companies in this case, came to the same conclusion. Even the insurance doctors considered Billy disabled from his chosen work as a pipefitter/welder!!
Currently, union scale for a welder/pipefitter is approximately $35.00/hour; at 2,000 working hours per year, the lost wage comes to a total of $70,000.00/year, for every year Billy is unable to work. It will take 39 years for the now-26 year-old Billy to reach the retirement age of 65, and so his wage loss could be worth as much as $2.7 million (before reducing it to present value, as Michigan court procedure requires).
Even if Billy is able to earn 75% of his pre-accident wage, he could still lose as much as $682,500.00 in lifetime wages. As well, this discussion does not even address the horrific pain and suffering Billy experienced in this accident. Dollar damages for pain and suffering could double that $682,500.00 figure.
In Billy’s case, the initial layer of coverage, that is, the insurance covering the at-fault driver, came to $350,000.00. Billy had a UIM policy of $500,000.00, and we know that his UIM insurance company is liable for the difference of the two policies, or $150,000.00. In this case, the at-fault driver’s insurance carrier has offered their policy limits, and Billy is now awaiting action on the remaining $150,000.00.
Steven, also in his 20’s, worked at a car wash, and was working wiping down wet cars, as they came off a conveyor, at an automatic car wash. Steven was pinned between two cars, when the at-fault driver “gunned” his engine, despite there clearly being people like Steven positioned (properly) in front of him. Steven was standing where he was required to stand; he was not “jaywalking”, or doing anything improper.
This accident broke both of Steven’s legs. On video.
Steven is a young husband and father of twin baby girls. In order to save money, he discontinued his UIM coverage, and he did so only two months before the accident. He had a 100/300 policy, and a 100/300 UIM policy; he reduced both, and might have even saved a whopping $200.00 – $400.00 over the course of a year.
As it turned out, the at-fault driver had only a 20/40 policy, which you will remember means that there was only $20,000.00 available to compensate Steven for his injuries.
If Steven had not cut back his own UIM coverage, there would at least be another $80,000.00 to compensate Steven for his injuries. As it has turned out, there is now nothing more than $20,000.00.
Because these coverages are optional, “our” Michigan Supreme Court has held that insurance companies can write into their policies, extremely short “notice” periods, and other contractual hurdles designed to defeat your UM/UIM claim before it even begins. “Notice period” provisions require written notice by the UM claimant to the insurance company, within the notice period, whatever it may be. In DeFrain v. State Farm, 491 Mich 359, 817 NW2d 504 (2012), the Michigan Supreme Court upheld the enforceability of a 30-day notice period. Often times, the injured person may not be able to determine the lack of insurance for more than 30 days, such as when the at-fault driver lies to the police about having insurance, when they really do not. Too bad, under DeFrain.
Does the optional UM/UIM coverage cost money? Yes it does. But can this money make a difference, at just the time when you, or the other injured person is most disabled? You bet.
The “Take Home” Message
Call Jon Frank, at (586) 727-1900, for questions on uninsured and underinsured motorist coverage, or email at [email protected].