Liability Insurance Settlements and Underinsured Motorist Coverage

When dealing with liability claims, especially those involving state minimum policy limits, understanding the process and key documents required is critical.

This article breaks down the essential steps to handle cases where liability and underinsured motorist (UIM) coverage play crucial roles. Let’s explore this complex scenario by unpacking the insurance process and precautions necessary to protect the client’s interests.

Understanding the Liability Policy Limits

In many states, the minimum liability policy limit is often insufficient to cover the total expenses of a serious accident.

In the example now presented, the policy limit is $30,000, but the client’s medical expenses alone are $37,446. This does not even account for other damages like pain and suffering, making it clear that the minimum policy falls short.

Fortunately, in this example, this client also has $30,000 available under an underinsured motorist (UIM) coverage, providing an additional layer of protection when liability coverage is exhausted.

Key Documents in a Liability Settlement

When settling with the liability carrier, several important documents and actions need to be taken to ensure that the settlement process proceeds smoothly and meets all legal requirements. These include:

1. Release of Liability: One of the most vital documents in a settlement is the release form, which outlines the agreement to settle the claim. It’s essential to be cautious with this document. The release should not be signed or sent to the liability carrier until all other necessary steps are completed.
2. Declarations Page (Deck Page): This page provides a clear outline of the policy limits. It’s crucial to obtain a copy of this page or, at the very least, a confirmation of coverage letter from the liability carrier. This helps confirm the policy’s limits and ensures that the settlement is based on accurate information.
3. No Coverage Affidavit: A “no additional coverage affidavit” ensures that there are no additional policies available that could cover the damages. This step is particularly important when dealing with multiple policies or when a policyholder has more than one coverage option.
4. Written Acceptance of the Demand: It is important to have written confirmation from the liability carrier that they are accepting the demand to settle for the policy limits. This can be in the form of an email or a formal letter.

Before proceeding with an underinsured motorist claim, it’s essential to get permission from the UIM carrier to settle the liability claim.

Requesting Permission to Settle from the UIM Carrier

In this case, even though both the liability and UIM carriers are the same Insurance Company, permission is still required.

This process involves submitting a formal request to the UIM adjuster, ensuring that they acknowledge the exhaustion of the liability policy’s limits before pursuing the UIM claim.

• Subject Line: When requesting permission, it is crucial to include a clear subject line in your email or letter, such as “Request for Written Permission to Settle Liability Claim” along with the UIM claim number.
• Documentation: You must provide documentation that proves the liability policy has been fully exhausted, including a copy of the declarations page or a confirmation of coverage letter showing that the settlement amount is the maximum available under the policy.

Navigating No Coverage Affidavits

A “no-additional coverage” affidavit can uncover hidden insurance policies that may provide additional coverage for damages.

This document requires the insured to disclose whether there are any other policies that might apply. In many cases, it has led to discovering new policies, providing more funds to cover the client’s damages.

This affidavit is especially useful when multiple people are listed on the liability release.

Each individual on the policy should sign their own no coverage affidavit, as additional parties may have separate insurance that could contribute to the settlement.

Important Precautions Before Sending the Release

It’s essential to hold off sending the signed release to the liability carrier until you’ve received written permission to settle from the UIM carrier. This ensures that the client retains the ability to pursue the UIM claim.

Additionally, all necessary affidavits should be completed, and no coverage gaps should be overlooked.

Failure to follow these steps can result in significant delays, complications, or even the inability to pursue additional compensation under the UIM policy.

Final Thoughts

Navigating liability and UIM coverage claims requires meticulous attention to detail, especially when dealing with policy limits and multiple insurance carriers. The process outlined here ensures that clients can maximize their available compensation, even when liability coverage is insufficient.

Key steps include obtaining all necessary documents, securing permission to settle, and thoroughly checking for any additional coverage.

By following these steps, legal professionals can avoid potential pitfalls and ensure their clients are appropriately compensated for their damages.