The Illusion - Underinsured Motorist Coverage - Call Lee Free

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The Illusion – Underinsured Motorist Coverage

The Michigan Court of Appeals came out with a new decision that clearly illustrates the frustration and uphill battle car accident and motor vehicle accident victims face in our state’s court system today. It also illustrates the despicable tactics various auto insurance companies take to ensure they pay the least amount of money possible to its policyholders.

In Dawson v. Farm Bureau Mutual Insurance Co. of Michigan, Timothy Dawson sustained horrible injuries as a passenger in a vehicle driven by Catrina Olinger when Ms. Olinger struck a bridge abutment. Mr. Dawson sued Ms. Olinger for negligence. Unfortunately, Ms. Olinger only had the state minimum $20,000 insurance policy. Mr. Dawson however had an auto insurance policy through Farm Bureau that contained an underinsured motorist provision (UIM) that allowed him to receive an additional $80,000 in damages from Farm Bureau. All was good for Mr. Dawson, or so it seemed.

Ms. Olinger’s insurance company wanted to settle the case for the entire $20,000 policy, however Farm Bureau required it approve any settlement in writing first and Farm Bureau refused to do so. Like most insurance contracts, the UIM carrier must provide written consent before the injured policyholder can accept settlement with the at-fault (Ms. Olinger) driver. Without this consent, the injured person can never gain access to the UIM benefit.

Farm Bureau used this simple statement in its insurance contract with Mr. Dawson as a sword to deny benefits. Mr. Dawson eventually received a $100,000 verdict in a jury trial that lasted 29 minutes, but Farm Bureau refused to pay because it never gave written consent to the judgment. Mr. Dawson countered that Farm Bureau was judicially prevented from denying UIM coverage because the issue of liability and damages was litigated at the trial. The trial judge agreed and ordered Farm Bureau to pay, but the Court of Appeals reversed.

In its decision, the three Court of Appeals judges, all of whom are very conservative, held that “contract is king” and because the insurance policy states Farm Bureau “will not be bound by any judgments for damages or settlements made without Farm Bureau’s written consent” it is not responsible to pay any of the $100,000 verdict. The Court went on to say that although the plaintiff tried to involve Farm Bureau in the litigation, and although Farm Bureau refused to participate, Farm Bureau still cannot be sued for UIM benefits unless and until other payments or judgments are exhausted. Basically, plaintiff’s trial verdict is meaningless as it pertains to Farm Bureau.

This line of reasoning is dangerous on a number of levels.

First, it assumes that all policyholders are educated participants in the contractual agreements they sign onto when they purchase car insurance. But everybody knows insurance contracts are contracts of adhesion – you are struck with what you got. Have you read your auto insurance policy? If you have, did you understand even half of what it says? Even if you do understand the policy language, have you ever called the insurance company to try to negotiate and change the terms? I’m sure the answers are no to all those questions. The insurance agent would laugh in your face.

In reality, people are struck with the terms in their auto insurance policy. For the Michigan Court of Appeals to state Mr. Dawson is bound by the terms of the contract he signed with Farm Bureau is disingenuous. Mr. Dawson didn’t know what he was signing, just like you and every other person who purchases car insurance. He was stuck with contract terms that only benefited the auto insurance company. If the terms are unreasonable, tough luck.

The Court of Appeal’s logic is also dangerous because it potentially prevents Mr. Dawson from ever being able to collect a single cent from the policy he was dutifully paying insurance premiums for. In legalese, his UIM benefits were “illusory” or imaginary. He was paying an extra premium for UIM benefits he would never be able to collect.

The reason is simple. Because no judgment (verdict or settlement) was entered against the negligent driver without Farm Bureau’s consent, Farm Bureau doesn’t have to pay. Even more frustrating, let’s say you do get past Farm Bureau’s ridiculous pre-conditions, it may be too late to sue them because the statute of limitations, or time limit to sue, has passed. Like Mr. Dawson, you care up the creek without a paddle. Heads you lose, tails they win.

This is why it is so important to contact a lawyer immediately after a car accident, truck accident or motorcycle accident. You never know what benefits you may be entitled to, and if underinsured motorist coverage (UIM) is available, there are very strict rules you must follow to ensure you get the coverage you paid for.