California Underinsured Motorist Law Unfair to Car Accident Victims
Many California insured drivers are surprised to learn that their underinsured motorist coverage does not cover them to the full extent of their coverage. So, for example, when you purchase a $100,000.00 worth of under insured coverage, you will never, under any circumstances, recover the full amount of that policy. This is because California insurance law grants the insurance company a set-off or deduction for any money the injured person received from the underinsured driver.
Here is how an underinsured motorist claim is currently handled in California. First, one must have underinsured motorist coverage which has higher limits than the at fault driver who caused the accident. Second, their personal injury claim must be worth more than the limits of the other driver, and one must settle their personal injury claim against the at fault driver for the full amount of that person’s policy. Third, they make a claim for the full amount of their damages, up to their underinsured limits, against their own policy. And finally, and here is where the inequity arises, the insurance company deducts from their claim any monies the injured person received from the settlement with the third party.
Here is how the program worked in a recent San Jose auto accident case where I represented a car accident victim in a personal injury claim. My client had a policy with $100,000.00 of underinsured motorist coverage. He was involved in a frontal collision with another driver. The at fault driver had liability limits of $50,000.00. As a result of the car crash, my client herniated a disc in his low back. He required surgery to repair the disc in his back and missed several months of work. The value of his personal injury claim was clearly worth more than $150,000.00 due to the pain and suffering he endured, his lost earnings, and medical expenses which were over $80,000.00. The case was settled with the other driver for the full amount of his limits of $50,000.00. Next a claim was made against my client’s underinsured motorist policy. Due to the extent of his injuries and damages, fairness would dictate that he was entitled to the full amount of his underinsured coverage, i.e. another $100,000.00. However, he was not entitled to the full $100,000.00, only $50,000.00. This is because his insurance company was legally entitled under existing California law to take a full set off for the amount received from the other driver.
This is unfair and must be changed. Whether someone purchases $100,000.00 worth of coverage, or any other amount of coverage, the insured expects that they will be covered up to the full amount of the coverage. Under California law as it now exists, however, the insurance companies never have to pay the full amount of the coverage, because there is always a settlement with the third party, which always entitles them to their deduction.
The California legislature and Governor Brown have an opportunity to help policyholders and correct this inequity. There is currently a bill before the Assembly, AB 1063, which will take away the insurance companies’ right to the set-off. This is the law in over half the States. As an Alameda personal injury lawyer, who has personally seen how the current law has resulted in great hardships and unfairness to California car accident victims, I strongly support the passage of this bill.