Uninsured Underinsured Motorist Insurance a Sleeping Giant
| Publication year | 1994 |
| Pages | 28 |
63 J. Kan. Bar Assn. May, 28 (1994). UNINSURED UNDERINSURED MOTORIST INSURANCE A SLEEPING GIANT
May, 1994
Copyright (c) 1994 by the Kansas Bar Association; Gerald W. Scott
"Uninsured motorist coverage is not actually liability insurance, but more closely resembles limited accident insurance." [FN1] Uninsured motorist coverage (UM) in Kansas started appearing in automobile insurance policies as early as 1956. Uninsured motorist coverage became mandated coverage with the passage of the original K.S.A. 40-284, effective 1968. K.S.A. 40-284 was enacted to fill the gap left by Kansas motor vehicle financial responsibility and compulsory insurance legislation and was intended to provide compensation to innocent persons who were damaged by uninsured or financially irresponsible motorists. [FN2] Uninsured motorist coverage, however, was limited in its scope and was offered only in limits of $25,000 per person/$50,000 per occurrence and did not extend to underinsured situations where the tortfeasor had liability limits less than the tortfeasor's responsibility for damages.
To solve these deficiencies, K.S.A. 40-284 was amended by the 1981 Legislature, effective January 1, 1982, to make mandatory the offering of uninsured motorist coverage equal to the policies' limits of liability coverage and to create the new coverage, underinsured motorist insurance. Now insureds could purchase coverages for their own protection equal to that which they purchased to pay damages to others caused by their negligence.
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ANALYSIS OF COVERAGE
Uninsured and underinsured motorist insurance coverages are a combination of two elements-the contractual provisions of the policy of insurance and the provisions of K.S.A. 40-284. Uninsured motorist and underinsured motorist coverages are mandatory and are included by operation of law in every policy coming under the statute even if the policy is silent or deficient in its terms. Any attempt by an insurer to diminish the statutorily mandated protection provided by the statute is void and contrary to public policy. [FN3]
Thus, in determining coverage and benefits, the first question to address is the coverage contained in the written policy, and the second, but interrelated question, is whether the policy comes within the mandated coverage. The answer to the second question is found in K.S.A. 40-284(a) which defines the scope of the statute as:
No automobile liability insurance policy shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, UNLESS.... Uninsured motorist and underinsured motorist coverage is mandatory if the policy:
a. Is delivered in Kansas; or b. Is issued for delivery in Kansas; and c. Insures a motor vehicle registered or principally garaged in Kansas. Uninsured motorist and underinsured motorist insurance coverages do not automatically attach to an out-of-state vehicle that travels upon the highways of Kansas as does liability coverage through reciprocal treaties between the state of Kansas and insurance companies doing business within the state of Kansas required by K.S.A. 40-3106. To provide uninsured motorist or underinsured motorist insurance coverage within Kansas, out-of-state vehicles must contain those coverages by their contract terms or the coverages do not exist. Mandated uninsured motorist and underinsured motorist coverage does not apply unless the vehicle is registered or principally garaged in this state. [FN4] However, a policy issued to an ICC or KCC common carrier that is filed with the Kansas Corporation Commission should qualify as "issued for delivery in this state."
An analysis of mandated uninsured motorist and underinsured motorist insurance in a policy covered by K.S.A. 40-284 involves separate review of the requirements of each of the sections of the statute.
A. Mandated Uninsured Motorist Coverage-Section (a)
Section (a) is the uninsured motorist mandate that every policy that comes within the statute must contain uninsured motorist coverage limits equal to the limits of liability coverage for bodily injury. Thus, if the liability limits of the policy are the minimum $25,000 per person/$50,000 per accident-the uninsured motorist limits must also be $25,000/50,000, but if the liability limits are higher, the uninsured motorist limits must increase respectively, unless limited by an effective waiver of limits above the minimum $25,000/50,000. In Kansas, uninsured/underinsured motorist limits may not be totally rejected, merely limited to minimum liability limits required to be provided in every policy under K.S.A. 40-3107.
The injured person is not, however, entitled to uninsured motorist benefits where the tortfeasor has minimum liability coverage required by law even though the insured's damages exceed that amount. [FN5]
This mandated coverage of uninsured [and underinsured motorist] coverage has been ruled to extend to umbrella or excess policies that provide automobile liability insurance coverage unless a written rejection was in existence. [FN6]
However, effective July 1, 1988, this ruling was negated as to uninsured motorist coverage by the amendment of K.S.A. 40-284(a) which removed excess, umbrella, and other non-primary motor vehicle insurance from the mandatory requirement of uninsured motorist coverage. Note that no similar amendment was made excluding umbrella or excess insurance policies from the mandatory coverage of underinsured motorist insurance required by K.S.A. 40-284(b). However, be aware that many umbrella and excess insurance companies still offer uninsured motorist and underinsured motorist insurance.
Coverage of the insured's "automobile" has some limitations. "Automobile" has been ruled to mean "motor vehicle" in relation to policies which must contain uninsured motorist coverage. [FN7] In Shumaker v. Farm Bureau Mut. Ins. Co., Inc., 14 Kan.App.2d 155, 785 P.2d 180 (1990), review denied, the court held the Kansas uninsured motorist laws did not require or prohibit coverage for off-road operation of a device designed primarily for use off road. Care should be taken, however, to review the specific language of the policy as some policies grant coverage to off-road vehicles.
B. Mandated Underinsured Motorist Coverage-Section (b)
Section (b) mandates that any uninsured motorist coverage shall include an underinsured motorist provision that enables the insureds to collect from their own insurer that portion of damages by which their underinsured motorist coverage exceeds that of the tortfeasor's liability limits. For example:
Insured's damages.
$100,000
Insured's UIM limits.
$100,000
Tortfeasor's liability limits.
$ 25,000.
Collect the first $25,000 from the tortfeasor's liability carrier
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and then the next $75,000 from the insured's own carrier's underinsured motorist coverage. Again, this mandated underinsured motorist insurance coverage must equal the limits of the policies' liability limits, unless there is a rejection that qualifies under section (c).
C. Right of Rejection Above $25,000-What Coverage can be Rejected or Limited?
Can the mandated coverage be rejected or limited in Kansas? The answer is two fold-prior to July 1, 1988, K.S.A. 40-284(c) gave the insured named in the policy the right to limited rejection, in writing, of the uninsured motorist coverage required by section (a) which is in excess of the limits for bodily injury or death set forth in K.S.A. 40-3107, presently $25,000 per person and $50,000 per accident. Remember the purpose of the 1981 amendment to K.S.A. 40-284 was to make mandatory the offering of uninsured motorist coverage equal to the limits of liability coverage and to create the new coverage, underinsured motorist insurance. The legislature did, however, allow for the rejection in writing of uninsured motorist coverage required by subsection (a) which is in excess of the limits for bodily injury or death set forth in K.S.A. 40-3107.
The scope of this section is argued by defense and plaintiff counsel. Plaintiffs' counsel argue that prior to July 1, 1988, this section only allowed rejection of uninsured motorist coverage because that is what is required by section (a). Defense counsel argue that section (b) coverage, underinsured motorist coverage is part of "uninsured motorist coverage" and both are generically contained in the right of rejection section and both may be rejected. The issue was mooted as to policies issued after July 1, 1988, by the amendment to K.S.A. 40-284 allowing the rejection of coverage required by both sections (a) and (b).
The earlier 1986 amendment to K.S.A. 40-284 relaxed the written rejection rule and allowed a written rejection to apply to any subsequent policy issued by the same insurer for motor vehicles owned by the named insured, including, but not limited to, supplemental, renewal, reinstated, transferred or substitute policies where the named insured had previously rejected the coverage in a prior policy to the insured by the same insurer and allows the rejection by the named insured to reject coverage for all insureds covered under the policy.
The statute, however, is clear that the rejection or limitation must be in writing even though the insured intended to purchase uninsured/underinsured motorists benefits in amounts less than its liability limits, the policy was written with lower stated limits, and a premium was paid based on the lower limits. The statute requires a separate written rejection document setting forth a specific date and policy number, signed by the insured before the insurance company can issue an automobile policy with uninsured/underinsured limits lower than its...
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