Tuesday, April 10, 2012

Appeals Court holds that per person rather than aggregate limit determines how much underinsurance individuals can recover

Steven and Angelica Blackburn were in an auto accident. Angelica incurred medical bills and lost wages in excess of $241,000 and Steven incurred medical bills and lost wages in excess of $80,000.

The other vehicle was driven by Helen Vieira. Vieira's insurance policy with Travelers had a bodily injury limit of $50,000 per person and $100,000 per accident. It paid Angelica and Steven $50,000 each.

The Blackburns sought additional coverage from their own carrier,Commerce, with which they had underinsurance coverage of $100,000 per person and $300,000 per accident. They asserted that they were each entitled to $100,000, because they were jointly entitled to the difference between the $100,000 per accident coverage limit o f Vieira's coverage and the $300,000 per accident limit of their policy. Commerce asserted they were each entitled to only $50,000 (the $100,000 per person limit less the $50,000 they had already received.)

In Commerce Ins. Co. v. Blackburn, 81 Mass. App. Ct. 519 (2012), the court agreed with Commerce, citing policy language providing that recovery is subject to the per person limit.

My first thought was that under this analysis there is more than $100,000 of illusory coverage. If the accident were caused by someone with no insurance, the optional uninsured coverage would apply, not the underinsured coverage. In Massachusetts the statutory minimum per person coverage for injury to someone else is $20,000 (although I believe there are states that do not have minimum coverage). Therefore, the most either Steven or Angelica could recover under the underinsured coverage, if they are injured by someone insured in Massachusetts, is $80,000 (the $100,000 per person limit minus the $20,000 they would receive from the tortfeasor's insurance), or a combined total of $160,000. That would leave a gap of $140,000 in the per accident limit they could never get.

So I looked at the standard Massachusetts auto policy. The underinsurance coverage covers the named insureds, as well as, in certain circumstances, any household member and anyone occupying the insured's vehicle.

On a related note, I strongly recommend that everyone purchase as much underinsured and uninsured coverage as they can afford. Don't rely on other drivers to have adequate insurance to cover your loss if they injure you in an accident.

1 comment:

H G Stern said...

VERY interesting post. As you know, I'm on the life/health side of the biz, but hang around with a lot of (unsavory?) P&C types. Your recommendation re: highest limits on UM/UIM is absolutelty spot on.

I'd also note that umbrella coverage is pretty darned cheap for what you get, and (AFAIK) can also include UM/UIM.