Underinsured motorist policy proves worthless in court case

J. Matthew Shellenbergar is an associate with the firm of Newman, Comley & Ruth, P.C. in Jefferson City.

If you think you have underinsured motorist coverage on your automobile insurance policy, think again.

Missouri's Motor Vehicle Financial Responsibility Law sets a minimum amount of liability insurance a Missouri driver must carry. The amount is $25,000 per person, $50,000 per accident and $10,000 for property damage. More than a few drivers satisfy this requirement by carrying only this minimum amount of coverage. Understandably, personal injuries and medical expenses resulting from a serious automobile accident can greatly exceed this level of liability coverage.

A driver at fault, of course, is personally liable for any amount in excess of his or her policy limits, but as a practical matter, those that choose to obtain automobile liability insurance policies with minimum or low amounts of coverage also have few assets from which to satisfy any outstanding judgment.

Moreover, when the accident did not result from a driver's intoxication, the responsible party could declare bankruptcy, discharging any obligation to satisfy personal injury and medical expenses exceeding the limits of his or her insurance policy.

To bridge the gap between an at-fault driver's low level of coverage and the actual injuries and costs sustained by another party in a serious accident, insurance companies routinely offer what is termed underinsured motorist coverage (UIM).

That is, if you are seriously injured in a motor vehicle accident that is not your fault, and the other driver has insufficient coverage, you can file a claim with your automobile insurer under the underinsured motorist coverage afforded by your policy. That, of course, is the theory.

In practice, something quite different may occur. In December 2002, the Missouri Court of Appeals for the Southern District handed down the case of Tapley v. Shelter Ins. Co. In that case, the insured's vehicle was hit by a truck. The collision was entirely the result of the truck driver's negligence. The insured's damages exceeded $150,000. The truck driver's insurance carrier paid the policy limits of $100,000.

To recover the difference, the insured made a claim under the UIM provision of her own policy that afforded UIM coverage in the amount of $50,000 per person and $100,000 per accident. The insurance company denied the claim.

Her policy defined an "underinsured motor vehicle" as "An insured motor vehicle when the sum of the limits of liability insurance coverage and bonds on such vehicle is less than the limits of liability of the uninsured motorist coverage on this policy." The uninsured motorist coverage limits were $25,000 per person and $50,000 per accident.

UIM policy provisions are drafted by lawyers, so they, like the rest of your policy, are notoriously difficult to understand. Here is what the language means in plain English: You have UIM coverage if the insurance policy limits on the other vehicle are less than what you have in uninsured motorist coverage on your vehicle.

Because by Missouri law, no motorist can be insured for less than $25,000 per person and $50,000 per accident, the uninsured limits involved in Tapley, there could never be a situation where the insured could invoke the UIM provisions of her policy, ostensibly offering $50,000 per person and $100,000 per occurrence.

The fact that the woman bought and paid for illusory UIM coverage did not render the policy ambiguous requiring an interpretation favoring the insured, explained the court. Following the lead of a previous case, Trapf v. Commercial Union Ins. Co., the court ruled in favor of the insurance company.

As a result, the insured was sold and paid for UIM coverage that could never be used. She received nothing.

How could the situation be otherwise? She could have obtained higher uninsured motorist coverage limits. In this case, she would have been required to obtain an uninsured limit exceeding the $100,000 policy limit of the truck driver to recover anything. However, she would have had at least potential UIM coverage if her uninsured motorist coverage limit exceeded the statutory minimum of $25,000 per person and $50,000 per occurrence.

The fact that you have not read or did not understand your insurance policy as written is no defense.

For more than a century, Missouri courts have consistently ruled that an insured has a duty to promptly read his or her insurance policy to determine whether it contains the desired coverage and reject it if it does not.

A UIM provision will vary from one insurance company to another. The definition of an underinsured motor vehicle or motorist is key.

Typically, policies define them as a vehicle with liability coverage less than the uninsured coverage limits or the UIM coverage limits of your policy.

So, if your policy ties the coverage comparison to your uninsured motorist coverage, make sure your uninsured motorist coverage exceeds the statutory minimum in Missouri.

Better yet, obtain uninsured limits considerably in excess of that amount. If your policy is one that compares coverage limits to your UIM limits, purchase a policy containing sufficiently high limits of UIM coverage, so it will exceed any low level of insurance offered by the other driver's policy.

Remember, read your policy. Read it again. Then, read it a third time to see to what your policy ties its UIM coverage, uninsured limits or UIM limits to.

Finally, since telephone calls are easily brushed aside, go visit your insurance agent. Explain your concerns and make sure the applicable limits are what they should be, or you could find yourself paying something for nothing.