Underinsurance Coverage in Automobile Accidents

• Publication year: 1986
• Pages: 417
• Citation: Vol. 15 No. 3 Pg. 417

15 Colo.Law. 417 Colorado Lawyer 1986.

1986, March, Pg. 417. Underinsurance Coverage in Automobile Accidents

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417

Vol. 15, No. 3, Pg. 417

Underinsurance Coverage in Automobile Accidents

by Stephen C. Kaufman

All too often the personal injury practitioner must tell clients that they will be undercompensated because, after an accident, the other driver's liability limits are insufficient adequately to compensate clients for their injuries and the other driver is judgment proof. Now there may be a way out. Counsel should review a client's insurance policy to see if it includes uninsured motorist coverage. If it does, the policy also includes underinsurance coverage.

The Concept of Underinsurance

CRS § 10-4-609(4) states that underinsurance is automatically a part of an insured's motorist coverage. It does not matter whether the policy itself makes any reference to or provides in substance for such coverage. Pursuant to the terms of the statute, a client is entitled to make a claim for underinsurance under his or her own policy when the other driver's liability limits are less than either the client's uninsured motorist limits or have been reduced below the client's uninsured motorist limits by payments made to other persons involved in the same accident.(fn1)

For example, if the other driver has liability limits of $25,000 and the client has uninsured motorist limits of $50,000, underinsurance coverage will be applicable. If both have limits of $50,000, underinsurance would not be available.

A key question is how to determine how much the client can collect. CRS § 10-4-609(5) provides the answer: the client is entitled to the lesser of (1) the limits of the client's own uninsured motorist coverage, less any amount paid to the client by anyone legally liable; or (2) the amount of damages the client has sustained minus any amount paid to the client by anyone legally liable.(fn2) The following examples should help to clarify the concept of underinsurance.

Example 1:

Suppose a client has sustained damages in the amount of $125,000, uninsured motorist limits equal $100,000 and the other driver has liability limits of $50,000. In this situation, the client would be entitled to recover $50,000 from underinsurance coverage. This is because the client's uninsured motorist limits of $100,000, minus the other driver's liability limits of $50,000, would equal $50,000. This is less than the total damages sustained of $125,000, minus the other driver's liability limits of $50,000, which would be $75,000.

Example 2:

Suppose a client has $100,000 in uninsured motorist limits and the other driver has $50,000 in liability limits, but the damages sustained equaled $75,000. In this case, the underinsurance recovery would be $25,000. This is because the total damages sustained of $75,000, minus the other driver's liability limits of $50,000, equals...