There’s a reason we purchase underinsured motorist (UIM) coverage — in the event of an accident, this policy is supposed to help us pay for medical bills, time off from work, out-of-pocket expenses, and pain and suffering that may not be covered by a negligent driver with inadequate insurance. However, in 2011 new laws allowed insurance companies to reinstate “reducing clauses.” These reducing clauses in automobile insurance policies stipulate that UIM coverage can be reduced by the amounts paid on behalf of the at-fault driver.
What does this mean?
Here’s an example:
Let’s say you have $25,000 of underinsured coverage and so does the driver who just ran a red light and smashed into your car and seriously injured you. The at-fault driver’s insurance company has a $25,000 liability insurance limit, so you receive that amount to cover your injuries. The problem is — that amount isn’t nearly enough to cover your total hospital and rehabilitation expenses. So you contact your insurance company to request compensation from your $25,000 underinsured coverage. Unfortunately, you cannot collect that $25,000 from your own policy because your insurance company is allowed to “reduce their coverage” by the amount you already received.
$25,000 received from at-fault driver – $25,000 underinsured coverage insurance = $0
Ultimately, you are stuck with paying the remainder of your medical bills if your underinsured coverage is equal to or less than the coverage of the at-fault driver.
When faced with a situation like this, it’s best to contact legal counsel to determine what your rights are under the law and determine whether you are eligible for more compensation.
