It's an all-too-familiar scenario. Joe has been in a bad car wreck, clearly the fault of Dan, the other driver. Joe's medical bills are high, he has been unable to work for months, and every aspect of his life has been changed for the worse.
Then Joe's lawyer gets the phone call from Flo, the adjuster at Dan's insurance company. The good news: Flo admits that Dan was at fault. She acknowledges that Joe was seriously hurt and his damages are high. And Flo will pay Dan's full policy limit to settle Joe's case. The bad news: Dan had bought insurance with only the minimum legal limit of coverage, $25,000 per person. That's nowhere close to paying Joe's doctor bills or making up for his lost wages, let alone other damages and expenses. “Does Joe want it in nickles, dimes or quarters?” Flo asks sweetly.
Fortunately, like most drivers, Joe has “UNDERINSURED MOTORIST COVERAGE” (“UIM”) on his policy. This is a provision in Joe's policy that says if Joe is injured by a driver who is not insured, or insufficiently insured, Joe's own company will step into the shoes of the other driver's insurance company and will provide additional coverage, up to the limit that Joe has purchased.
[Tip: Check your policy to be sure you have this important coverage. Some cut-rate insurance sellers suggest waiving UIM coverage to save a few pennies on premiums — a bad choice! And if you have UIM coverage, do not settle with the other driver's insurance without getting an attorney's advice. If not handled correctly, a settlement with the other insurance company could destroy your potential claim for underinsured motorist benefits.]
The UIM insurance comes from Joe's own insurance company, but that does not mean that Joe's company will be on his side (never use “insurance” and “loyalty” in the same sentence!). To the contrary, Joe's own company will fight and defend the claim just like Dan's company would. But when the dispute is with the UIM carrier, it is handled differently than it would have been against Dan's insurance.
UIM and Arbitration
In some states, all UIM claims are handled by private arbitration rather than by going through the court system, and that was once generally true in Washington as well. However, Washington law allows insurance companies to spell out in the policy contract how UIM disputes are to be decided. It varies from company to company, but many insurance companies have re-written their policies to make UIM claims more adversarial and difficult for claimants.
Some companies' policies have language (called a “‘sue-us' clause”) that require UIM claims to go through the court system. In such a case, instead of filing the lawsuit against Dan, Joe would file his lawsuit against his own insurance company. If the case cannot be settled along the way, it winds up in a courtroom trial with judge and jury.
Some UIM policies still call for private arbitration in UIM cases. An arbitration case is generally quicker, with less hassle and expense than if it were filed in court. Instead of a three-day jury trial, arbitrations are usually held in a law office conference room and often completed in less than a day. In this age of skeptical, hostile juries in personal injury cases, having the case heard by one or more experienced neutral arbitrators is often preferable for the injured person, as compared to a jury trial.
In days gone by, a panel of three arbitrators (one selected by the claimant, one selected by the insurance company, and a third selected by agreement of the other two) was the norm to preside over. UIM case. Now, though, many policies call for only a single neutral arbitrator, selected by agreement of the parties. Why the reduction from three arbitrators to one? Washington law requires the insurance company to pay the arbitrators' fees, no matter how many there are.
Still other policies cleverly state that the UIM dispute will be resolved by arbitration “unless either side objects.” In other words the insurance company is saying, “we'll agree to arbitrate unless we don't want to” — and insurance companies usually don't want to.
A seemingly-simple personal injury case can involve several types and layers of insurance coverage, vastly complicating the issues and procedures, and creating dangerous pitfalls for the unwary. There is no substitute for the sound advice of an attorney experienced in handling cases of this nature.