Los Angeles Uninsured Motorist Attorney, Barry P. Goldberg, observes that Underinsured Motorist claims are always “exhausting!” Underinsured motorist coverage requires exhaustion of the tortfeasor’s policy limits and submission of proof of payment to the insurer. (Wedemeyer v. Safeco Ins. Co. of America (2008) 160 Cal.App.4th 1297, 1303)
In California, auto insurance policies must provide coverage for insureds where the other driver has liability insurance but with limits lower than the insured’s own Uninsured Motorist limits. (Ins.C. § 11580.2(p)) This is called “Underinsured Motorist” coverage or UIM.
UIM allows insureds to recover from their own insurer the difference between whatever is available from the negligent driver’s liability insurance and the insureds’ own Uninsured Motorist limits. The negligent driver is considered “underinsured” only in relation to the particular insured’s own UIMC: “In short, the fundamental purpose of section 11580.2 is to provide the insured with the same insurance protections he would have enjoyed had the tortfeasor carried liability limits equal to insured’s underinsured motorist limits.” (See, Viking Ins. Co. v. State Farm Mut. Auto. Ins. Co. (1993) 17 CA4th 540, 548.)
Of course, Underinsured Motorist claims are easy in concept but not always easy in practice. One central requirement of UIM claims is that the limit of the negligent driver’s liability policy must be “exhausted” by actual payment and that UIM claimants provide proof of the extent of that limit and that the limits were actually paid. As a practical matter, the UIM claimant must obtain a reasonably reliable copy of the negligent driver’s auto policy declarations page and perhaps verification from that insurer that the policy had a particular limit. Often, insurers will provide that information in response to a well written policy limits demand which requires proof of the extent of the policy limits as a pre-condition to any settlement.
In addition, the claimant must present “proof” of such payments because UIM coverage does not apply until the limits of bodily injury liability under the policy covering the other vehicle have been exhausted by payment of judgments or settlements. (Ins.C. § 11580.2(p)(3); see also, Quintano v. Mercury Cas. Co. (1995) 11 Cal.4th 1049, 1056—exhaustion of underinsured’s policy is a “precondition to underinsurance coverage.”) If it is a single party, or multiple parties represented by a mutual law office, presenting proof is relatively simple. A photocopy of the negligent driver’s insurance check or checks totaling the amount of the policy limits will suffice. If multiple parties are involved, represented by multiple attorneys, obtaining copies of the checks is not always easy. But, to be clear any payment for less than the policy limits does not equal “exhaustion.”
One of the benefits of UIM coverage is that it should be relatively quick and inexpensive to pursue after settlement of the negligent driver’s policy limits. Sometimes this is not within your control if the other claimants have not perfected their claims and resolved the case for the total policy limits. Moreover, it could take several weeks and a lot of convincing for those other claimants to provide copies of their settlement checks in order to allow your client to promptly pursue his or her UIM claim.
The UIM law becomes even more confusing in concept when there are multiple parties and the UIM claimant receives an odd amount that does not even come close to the per claim policy limits. For example, my office currently represents a client who may only receive a very small amount from the negligent driver’s liability policy in comparison to the other multiple claimants. In this example, it is possible that my client may receive as little as $1,000. However, she has an Uninsured Motorist Policy with a per claim limit of $100,000. Assuming that her claim is worth $100,000, her insurer will only be entitled to a credit of $1,000 and will nonetheless be required to pay $99,000—totaling $100,000 for the insured client.
One of the unique problems is that the Uninsured Motorist insurer does not have an opportunity to argue or influence the amount that it’s insured receives from the negligent party. The insured could receive a very small portion which ups the amount the insurer will have to pay. Although I have never seen this in practice, it is also possible that the insured claimant might receive nothing from the negligent driver and the UIM claim might be for 100% with no credit whatsoever. In the hands of unscrupulous counsel, there is the possibility of collusion which would artificially endeavor to have the UIM insurer pay more by an agreement that its insured take less from the negligent driver in settlement.
While I would never endorse collusion, the statute, as written, only requires that the limit of the negligent driver’s liability policy be exhausted by payment. This result is still consistent with the goal of UIM coverage to ensure that UIM benefits are available when an insured has not recovered equivalent amounts from all tortfeasors liable for the injury. (See, Mercury Ins. Co. v. Vanwanseele–Walker (1996) 41 Cal.App.4th 1093, 1107.)
In order for the UIM statute to work for you it is critically important that the claim be pursued promptly and carefully. Make certain that documentation of the policy limit is obtained from the negligent adverse driver. Further, make absolutely certain that the policy limit is “exhausted” by providing the UIM insurer with irrefutable proof that the policy limit was actually paid—-even if it was not you that received the balance of that policy limit payment.
For more information about the article author and attorney Barry Goldberg’s uninsured and underinsured motorist expertise, please visit his web page, Los Angeles Uninsured Motorist Attorney. www.barrypgoldberg.com/
For a free consultation, Please call Barry P. Goldberg at (818)222-6994
