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Uninsured/Under-insured Motorist Coverage

According to law, every automobile policy issued in the State of Alabama must contain uninsured/under-insured motorist ("UM/UIM") coverage. Ala. Code ' 32-7-23 (1975). An insured may opt out of this coverage by providing written notice to their insurer that they do not want UM/UIM coverage, however this is rare. The purpose of UM/UIM coverage is to provide motorists the same protection when they are injured by an uninsured or under-insured motorist as they would receive from an injury inflicted by a driver with a standard insurance policy. For purposes of UM/UIM coverage, an insured may be either the named policy holder, additional insureds (spouse/children), or passengers.

 

In general, the coverage provides protection to an insured who receives bodily injury because of the negligence of an uninsured or under-insured motorist. An uninsured motor vehicle is one in which neither the owner nor the operator carries bodily injury liability insurance. If an insured is in an accident with another motorist in which the other motorist is liable but does not have bodily injury liability coverage, the insured may collect from their uninsured motorist coverage. For example, if an insured suffers $25,000 worth of bodily injury in an accident with an uninsured motorist and has $30,000 worth of UM coverage in their policy, they can recover $25,000 worth of injury from their insurer.

An under-insured motor vehicle is one in which the sum of the coverage available to an injured person under the policy is less than the amount of damages the injured party is legally entitled to recover. If an insured is in an accident with another motorist in which the other motorist is at fault but does not have enough bodily injury liability coverage to cover the insured's injury, the insured may collect from their under-insured motorist coverage. For example, assume an insured suffers $100,000 worth of bodily injury in an accident and has $30,000 worth of UM/UIM coverage. The at fault motorist has bodily injury liability coverage of $75,000. The insured may recover $75,000 from the at fault motorist, and the remaining $25,000 to which they are legally entitled from their UM/UIM insurer.


In an under-insured motorist situation, an insured may not recover more than amount of injury they are legally entitled to, even if their UM/UIM policy limit has not been reached. Additionally, an insured may not recover any money from their UM/UIM insurer until the limit of the at fault motorist's coverage has been reached. Thus, if an insured suffers $100,000 worth of bodily injury, they may not recover from their UM/UIM insurer if the at fault motorist has a coverage limit of $100,000 of more.

 

If an insured's injuries cost more than the total amount of coverage available to them, the law allows for something called stacking. Stacking occurs when an insurance policy covers more than one automobile. The UM/UIM coverage provided is individual to each vehicle, meaning that there is $25,000 (or any other amount) of coverage per vehicle. In stacking, a person who is injured in one vehicle, but whose UM/UIM limit does not fully cover their injuries, can "stack" the benefits from the other vehicles in their policy. For example, assume an insured has $400,000 worth of bodily injury. They have recovered the maximum of $150,000 from the at fault motorist's coverage, so they turn to their UM/UIM coverage. The insured has 3 cars insured in their policy, with $50,000 of UM/UIM coverage each. Under the concept of "stacking," because the $50,000 recoverable from one UM/UIM policy is not sufficient to cover their injuries, the insured is allowed to "stack" the UM/UIM coverage from all three vehicles, allowing them to recover an additional $150,000 for a total compensation of $300,000.

Under the statute, ' 32-7-23(c), an insured may only stack two additional vehicles per policy. Thus, even if the insured in the above example had 5 vehicles insured on their policy for $50,000 (allowing a theoretical recovery of $250,000 in UM/UIM coverage, which would meet their $400,000 in bodily injury), they would only be able to recover from stacking 2 additional vehicles, bringing their maximum total recovery to 3 vehicles, or $150,000. However, the statute only applies to vehicles on the same insurance policy. If an insured has multiple insurance policies on multiple vehicles, they may stack those beyond the 3 total allowed by statute. This stacking of multiple insurance policies only applies when the person seeking to stack is the named or additional insured. A passenger may not stack the named insured's other insurance policies, however they may stack other insurance policies in which they are the named insured.

 

In order to receive UM/UIM benefits, there are procedural requirements which an insured must follow. If the insured is seeking UM/UIM benefits, they must provide notice to their UM/UIM insurer. This notice can be accomplished in two ways. The insured can name their UM/UIM insurer as a defendant in their suit against the uninsured/under-insured motorist OR merely give their UM/UIM insurer notice of the filing of the action and the possibility of a claim under their UM/UIM coverage after the trial. In each situation, the insurer has two options. If the insurer is named as a defendant, they can opt to participate in the trial OR they can "opt out" of the trial and not participate. If the insurer is merely given notice, they may "opt in" to the trial as a named defendant, or they may choose to remain on the sidelines.


There are consequences to the insurance company's choice. If the insurance company chooses to participate in the litigation, they will be a named defendant, in which case their identity and reason for being there will be proper information for the jury. However, if the insurance company chooses not to participate in the trial, no mention of their potential involvement or the existence of insurance coverage is permitted.


Contributing Author:

Christopher J. Zulanas
Christopher J. Zulanas, Shareholder
Email Address czulanas@friedman-lawyers.com
Direct Line 205-278-7050
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This client alert is provided solely for educational and informational purposes. It is not intended to constitute legal advice. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.