WHAT ROLE DOES UNINSURED/UNDERINSURED COVERAGE PLAY IN A CAR ACCIDENT?

Posted in Car Accidents on March 21, 2020

What is uninsured/underinsured motorist (UM/UIM) coverage?

Every driver in Georgia is required to have minimum automobile liability insurance coverage when operating a car so that if a driver causes an accident and another driver is injured as a result, the at-fault driver’s automobile liability insurance policy would provide compensation to the injured driver up to the policy limits.

Ideally, every driver’s liability insurance policy would provide adequate coverage to pay for 100% of the damages. However, this may not be the case in reality. For example, some drivers drive around without any automobile liability insurance. Other drivers cause accidents and just leave the scene (hit-and-run). Also, the at-fault driver’s insurer might contest who caused the accident and deny liability. All of these are scenarios where the at-fault driver’s car may be considered an uninsured motor vehicle.

The purpose of UM/UIM coverage is to place the injured insured in the same position as if the at-fault uninsured driver were covered with liability insurance. The Georgia uninsured motorist statute is designed to protect the insured as to his actual loss, within the limits of the policy or policies of which he is a beneficiary.

Who is “insured” under the Georgia Uninsured/Underinsured Motorist Act?

Only the “insured” could take advantage of any UM/UIM coverage. “Insured” here means: the named insured (i.e., the person whose name appears on the actual policy); relatives (including spouse) who reside in the same household as the named insured; any person who uses a covered car with the named insured’s permission; or a guest in a covered car.

What types of UM/UIM coverages are out there?

There are two main types of UM/UIM coverage available in Georgia: reduced/traditional and add-on or excess.

What is reduced/traditional UM/UIM coverage?

Under reduced/traditional UM/UIM coverage, the policy limit of this coverage is reduced by what is available under the liability insurance policy. For example, let’s say that the driver who caused the accident has the minimum liability coverage (i.e., $25,000.00 per person and $50,000.00 per accident). If the policy limit of your reduced/traditional UM/UIM coverage is $50,000.00, then the limit of this UM/UIM coverage is reduced by $25,000.00, leaving $25,000.00 available under the UM/UIM coverage. Thus, you would have a total of $50,000.00 in insurance coverage ($25,000.00 plus $25,000.00).

What is add-on or excess UM/UIM coverage?

Under add-on or excess UM/UIM coverage, the policy limit is not reduced by what is available under the liability insurance policy. For example, let’s say that the driver who caused the accident has the minimum liability coverage. If the policy limit of your add-on/excess UM/UIM coverage is $50,000.00, then the total available insurance coverage would be $75,000.000 ($25,000.00 plus $50,000.00).

What if there are multiple UM/UIM policies available?

If there are more than one UM/UIM policy you could go after, you may be able to “stack” these policies. When you “stack” UM/UIM policies, you have to figure out in which order the specific UM/UIM coverage kicks in. For example, let’s say that you are injured while a passenger in my car when we get rear-ended by a driver with only the minimum liability coverage. Let’s further assume that I have an add-on UM/UIM coverage (for example, $30,000.00) under my own automobile insurance policy, and so do you (for example, $30,000.00). If the extent of your injuries is $85,000.00, what is the order in which payments are made towards your damages?

Courts generally employ three priority-of-payment rules or tests for determining the order in which the available UM/UIM policies should be stacked: the “receipt of premium” test, the “more closely identified with” test, and the “circumstances of the injury” test. Under the “receipt of premium” test for determining the order in which available UM/UIM policies should be stacked, the insurer that receives a premium from the injured insured is deemed to be primarily responsible for providing coverage. Under the “more closely identified with” test for determining the order in which available UM/UIM policies should be stacked, the policy with which the injured party is most closely identified must provide primary coverage. If neither the “receipt of premium” test nor the “more closely identified with” test for determining the order in which available UM/UIM policies should be stacked is helpful in a particular case, courts look to the “circumstances of the injury” to see which policy provides primary coverage.

In the example above, the order of payments by the insurers would be as follows:

Total Damages: $85,000.00

(1)At-fault driver’s liability policy: $25,000.00

(2)Your UM/UIM policy: $30,000.00

(3)My UM/UIM policy: $30,000.00