Triggering Your Underinsured Motorist Claim– California Law Requires Collection Of Third Party Policy Limits

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When a person is injured in a car accident caused by a negligent driver, the negligent driver’s automobile insurance liability policy limit is often not high enough to cover the damages from the personal injuries.  In these circumstances, there may be an underinsured motorist coverage claim under the injured person’s automobile policy, if that policy includes the coverage.

In California, for underinsured motorist coverage to be triggered, the injured-insured must collect the negligent driver’s insurance policy limits, and send proof of that to the underinsured motorist carrier.  This codified in the California Insurance Code §11580.2(p)(3), which states that underinsured motorist “coverage does not apply” until the policies of “all insured motor vehicles causing the injury have been exhausted by payment. . .”

This means, to preserve an uninsured motorist claim, the injured-insured must make a claim and, if necessary, sue the negligent driver.  In other words, to become eligible to make an underinsured motorist claim, the injured-insured must “take action against the tortfeasor [and] obtain a settlement or judgment and submit proof of payment . . .” (Quintano v. Mercury Casualty Co. (1995) 11 Cal.4th 1049, 1055.) If they fail to do so “there is no underinsured motorist coverage available.” (Hartford Fire Ins. Co. v. Macri (1992) 4 Cal.4th 318, 327.)

Taking action to collect the negligent driver’s insurance policy limits (known as third-party insurance) can be a tricky and difficult undertaking.  Unless the negligent driver’s insurance company settles, an injured insured has to sue the negligent driver, take him or her to trial, and collect the policy limits.  If legal action is necessary against the negligent driver, obtaining legal representation is often necessary and prudent.

All of this is only “to be eligible to make a claim.” (Quintano, supra, at 1055.) It does not mean satisfactory payment is necessarily forthcoming.  Indeed, there are often aspects of underinsured motorist laws, including the amount available to cover an injury, that insureds can find an unwelcome surprise once they make a claim.

Other complications may arise requiring proceeding through trial against the negligent driver.  For instance, where it is questionable whether the personal injury damages exceed the third-party insurance limits, the negligent driver’s insurance company may not want to pay policy limits.  Yet, the injured-insured cannot settle for less than policy limits without forfeiting her underinsured motorist claim.  Those cases often must proceed to trial to collect the third-party limits and trigger the underinsured motorist claim.

If a person is seriously injured in a car accident in California, and has underinsured motorist coverage, it is important to keep in mind the rules required to trigger the coverage. Actually doing so may be a complicated task, requiring prosecution of a civil action against the negligent driver to collect the third party insurance policy limits.