Why Underinsured Motorist Coverage Is So Important

undefinedAlthough we try not to think that potentially catastrophic situations might await us just around the next corner, there are some automobile accidents that we simply have no opportunity to avoid, no matter how much caution we exercise in our daily driving routine.

All vehicle owners in Massachusetts are required to carry auto insurance. Unfortunately, many people continue to drive without coverage—or the bare minimum. When you are involve din an uninsured or underinsured motorist accident, an experienced personal injury attorney can explain your rights and legal options to recover financial compensation.

The Guy Who Hits You Might Be Judgment-Proof.

Picture the following all-too-frequent occurrence: you are approaching a controlled intersection in a closely settled area, with houses situated close to each of the four intersection corners. A green light governs your entry into that intersection, but you have absolutely no idea what is approaching from the right and left sides of the intersecting street. You have passed through this same intersection on your way home from work every day without incident. Today, however, a distracted 17-year old driver just ran the red light from your right side and has broadsided your car.

Suddenly, for the first time in your healthy life (if you are lucky), you are facing a lengthy hospitalization, recovery, lost income and serious medical expenses – none of which you had even remotely considered as you approached that intersection. Now picture this added insult to your injuries: the 17-year old driver has only the compulsory $20,000 bodily injury coverage limit on his automobile. And like 99% of 17-year old drivers, he is judgment-proof, meaning the most you will ever recover from him will be the coverage limit on his auto policy. And his insurance company will immediately fork over the coverage limit to you and walk away.

Your problem, however, is that your medical bills will exceed $100,000 and, what’s worse, your private health insurance carrier has exercised his lien rights against that $20,000 recovery, leaving you with nothing. What do you do now?

Have You Insured Yourself Against A Judgment-Proof Defendant?

The answer depends upon what kind of optional coverage you elected to buy when you purchased your own automobile insurance years ago. All too many people buy only the compulsory insurance required by law as a quick-and-dirty means of getting their first car on the road as cheaply as possible, without ever re-visiting whether they have enough coverage as their circumstances change later on.

If you find yourself in a situation like the one shown above, you will become quickly aware that the Massachusetts Automobile Insurance Policy contains an optional coverage provision way down at the end of the policy entitled “Part 12. Bodily Injury Caused by An Underinsured Auto”. Once you become aware of it, you will quickly go to your coverage selections page to see if you elected to get Underinsured Motorist (“UM”) Coverage when your insurance agent first discussed it with you (and they always do) when you first put your car on the road.

If keeping the premium as low as possible was your objective back then, it is highly likely that you don’t have UM coverage.

Even If You Have UM Coverage, Do You Really Have It?

Let’s say you do have UM Coverage. What then? Well, there are important qualifiers. Whether you can make a recovery against your own policy depends on how much UM coverage you purchased. Moreover, in Massachusetts, your insurer gets to offset (from the UM coverage it provides to you) the amount of the bodily injury recovery that you obtained from the teenager’s insurance carrier. In our hypothetical, that recovery was $20,000. So, if, for example, you have $100,000 in UM coverage, you don’t get to recover the full $100,000 in coverage benefits. You will be limited to $80,000 in your UM recovery – even though you thought you were buying $100,000 in UM coverage. On the other hand, if your recovery from the bodily injury claim was $50,000 and your UM coverage was $50,000 or less, you would recover nothing in UM benefits. Unfair, perhaps, but true.

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Hospital and HMO Liens Do Not Apply to UM Insurance Recoveries.

If you are one of the lucky motorists who had the foresight to obtain enough UM coverage to enable a recovery beyond the offset, there is this one additional bit of good news: hospitals and HMO’s cannot impose their statutory lien rights against your UM recovery (if there is one) like it can against the bodily injury recovery. The Supreme Judicial Court has held that a UM claim is not a claim for damages but rather a claim for contractual benefits from the UM insurance carrier.

There Is A Connection Between How Much BI Coverage You Have and How UM Coverage You Can Obtain.

Finally, there is one statutorily built-in limit to how much UM coverage you can buy: the UM coverage you buy for yourself can’t be more than the amount of optional bodily injury coverage you purchase (under Part 5 of your policy for) the benefit of others when you are the one who causes the accident.

If you find yourself reading this blog, think about reviewing your own UM coverage limits to see if they still make sense for you and other drivers in your household. And while you are at it, take a look at your MEDPAY coverage. It is inexpensive and represents the best value in your auto insurance coverage.

About the Author: James M. Lynch is a Massachusetts personal injury lawyer and family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts.

Schedule a consultation with James M. Lynch today at (781) 253-2049 or send him an email.

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