Definition of UM/UIM Motor Vehicle

Both UM/UIM motor vehicles are defined in Idaho Code § 41-2503; however, both definitions are “subject to the terms and conditions of such coverage” contained in the UM/UIM policy. While the statutory definition of a UM motor vehicle is similar to most UM policy definitions, the statutory definition of a UIM motor vehicle is inconsistent with every policy definition of a UIM motor vehicle, and simply does not make sense. In Pena v. Viking Ins. Co.,[iv] the Idaho Supreme Court agreed, disregarded the statutory definition of a UIM motor vehicle, and followed the Viking policy definition of a UIM motor vehicle.

Generally, the policy definition of a UM motor vehicle means a land motor vehicle (1) to which no bodily injury liability policy applies at the time of the accident; (2) to which a bodily injury liability policy applies at the time of the accident, but the insuring company denies coverage or is or becomes insolvent; or (3) which is a hit-and-run vehicle whose owner or operator cannot be identified and which strikes an insured, a vehicle in which an insured is occupying, or an insured vehicle.

In defining what a UM motor vehicle is, UM policies also define what a UM motor vehicle is not; you will need to review this in any UM policy coverage analysis.

There are generally two definitions for a UIM motor vehicle: a comparison of limits definition or a comparison of damages definition.

First, a UIM motor vehicle means a land motor vehicle to which a bodily injury liability policy, meeting the minimum limit of liability for bodily injury specified by the State of Idaho, applies at the time of the accident, but the sum of all applicable limits of liability for bodily injury is less than the coverage limit for UIM coverage shown on the declaration page or has been reduced by payments for bodily injury to persons injured in an accident, other than an insured person, to less than the coverage limit for UIM coverage shown on the declaration page.

This UIM motor vehicle definition is a “comparison of limits” definition, which compares the limits of the tortfeasor liability policy with the UIM limits shown on the declaration page. For example, if the tortfeasor liability limits are $50,000/$100,000, and the UIM bodily injury limits are $50,000/$100,000, the definition of a UIM motor vehicle is not met. However, if the tortfeasor liability limits are $50,000/$100,000, and the UIM bodily injury limits are $100,000/$300,000, the definition of a UIM motor vehicle is met.

Second, other UIM policies may define a UIM motor vehicle as a motor vehicle to which a bodily injury liability policy applies at the time of the accident in an amount at least the minimum amounts  required by the financial responsibility of the laws in the state where the insured vehicle is garaged, and in which the limits of liability are less than the amount of damages the insured person is legally entitled to recover for bodily injury.

This UIM motor vehicle definition is a “comparison of damages” definition, which compares the limits of the tortfeasor liability policy limits to the amount of damages the insured is legally entitled to recovery for bodily injury. In other words, using the UIM policy limit comparison example stated previously, if the tortfeasor liability limits are $50,000/$100,000 and the UIM bodily injury limits are $50,000/$100,000, and the insured’s damages are more than the tortfeasor’s per person liability limits of $50,000/$100,000, the tortfeasor vehicle would meet the definition of a UIM motor vehicle.

In defining what a UIM motor vehicle is, UIM policies also define what a UIM motor vehicle is not; you will need to review this in any UIM policy coverage analysis.

UM/UIM Exclusions

UM/UIM exclusions are standard in UM/UIM policies and must be reviewed as a part of any coverage analysis. However, the exclusion that is within the control of the insured and counsel is the consent-to-settle exclusion. The “consent-to-settle” exclusion in UM/UIM policies has been addressed by the Idaho Supreme Court in Bantz v. Bongard,[v] and Christmann v. State Farm Mut. Auto. Ins. Co.[vi] The primary reason behind the consent-to-settle clause of UM/UIM policies is to prevent the insured from settling with the tortfeasor and thereby releasing any potential subrogation claim that the insurer may have against the tortfeasor.

Non-compliance with the consent-to-settle provision of a UM/UIM policy may bar any recovery by the insured if the insurer can show that it was prejudiced by the unauthorized settlement.  Absent a showing of a prejudice, courts will not enforce a forfeiture of UM/UIM coverage. I recommend that a consent to settle always be obtained from the UM/UIM insurer to avoid any potential for prejudice, barring recovery of UM/UIM benefits by the insured. If coverage and damages are not in dispute, the insurer has the option to advance UM/UIM benefits to the insured and if a subrogation claim is thereafter determined to be not viable, the insurer can recover the UM/UIM advance from the tortfeasor’s liability policy limits.

Limits of Liability

The limits of liability provisions of UM/UIM policies are probably the most litigated and contentious provisions of UM/UIM policies.

All UM/UIM policies contain internal anti-stacking provisions, which, in general, provide that the limit of liability shown on the declaration page for UM/UIM coverage is the most the insurer will pay regardless of the number of claims made, covered autos, insured persons, lawsuits brought, vehicles involved in the accident, or premiums paid. At this time, internal anti-stacking UM/UIM provisions have been preserved by the Idaho Supreme Court.[vii]

External anti-stacking provisions have not fared as well. The typical external anti-stacking provisions are contained in the other insurance clauses of UM/UIM policies and generally provide that “if this policy and any other policy affording similar insurance apply to the accident, the maximum limit of liability under all policies shall be the highest limits of liability under any one policy.” In Gearhart v. Mut. of Enumclaw Ins. Co.,[viii] the Idaho Supreme Court held that this language was “confusing,” and held that Enumclaw was required to pay $300,000 in UIM benefits under two separate Enumclaw policies, providing UIM coverage in the amount of $600,000 for a seriously injured child. However, in Gearhart, the Idaho Supreme Court distinguished its prior decision in Erland v. Nationwide Ins. Co.,[ix] where it upheld an external anti-stacking provision.

In Eastman v. Farmers Ins. Co.,[x] the Farmers UIM policy excluded UIM coverage for a vehicle other than an insured vehicle, “unless the owner of that vehicle has no other UIM coverage.” Eastman was involved in a motor vehicle accident while a passenger in a van operated by the Spokane Transit Authority. The Transit Authority van provided UIM coverage. The Idaho Supreme Court held that the “non-owned vehicle” exclusion violated public policy and that Eastman had $500,000 of UIM coverage under the Farmers policy.

The other insurance clauses of UM/UIM policies generally provide excess coverage only for non-owned motor vehicles.

All UM/UIM policies contain provisions offsetting or reducing UM/UIM benefits. Typically, the limits of liability for bodily injury under UM/UIM coverage will be offset or reduced by all sums: (1) paid because of bodily injury by or on behalf of any persons or organizations that may be legally responsible; (2) paid under the liability portion of the policy; and (3) paid or payable because of bodily injury under any of the following or similar laws, such as workers compensations laws or disability benefits law.

Some UM/UIM policies contain a duplicated payment provision providing that any UM/UIM benefits will not duplicate any amounts paid or payable for the same bodily injury or the same elements of damages.

In Wood v. Farmers Ins. Co.,[xi] the Idaho Supreme Court upheld the offset/reduction provisions of the Farmers UIM policy where the tortfeasor’s $100,000 bodily injury liability limit was offset against Wood’s $100,000 UIM coverage resulting in no UIM benefits payable. The Court rejected a public policy argument.

Regarding reductions for workers compensation benefits paid, in Cherry v. Coregis Ins. Co.,[xii] the Idaho Supreme Court set forth a formula regarding reductions for workers compensation benefits payable as follows: the Coregis’ UIM coverage of $250,000 was reduced by the $100,000 paid to Cherry by Farmers, the sum recovered in the third-party tortfeasor action.  Further, Coregis’ UIM coverage to Cherry was reduced only by the net amount of workers compensation benefits paid or payable to Cherry in the amount of $36,079.63, after the worker’s compensation subrogation claim was satisfied.

This amount included Cherry’s attorney fees and costs charged by Cherry’s attorney in representing her in the third-party tortfeasor action. Therefore, the balance of Corgeis’ UIM coverage was $113,920.37 ($250,000 UIM limit, less $100,000 paid by Farmers, less $36,079.63 net workers compensation benefits paid).

In Pena, Pena was injured in a motor vehicle accident with a motor vehicle insured by State Farm with a liability limit of $25,000/$50,000. The Idaho Supreme Court held that the Viking UIM coverage of $25,000/$50,000 was illusory because the UIM coverage offered extremely minimal, if any, coverage, and afforded no realistic protection to that group or class of injured persons who choose to purchase a minimum limits UIM policy. Therefore, the offset provisions in the Viking UIM policy did not apply because the policy terms excluding such coverage are void and unenforceable.

However, the Court, in finding that the Viking UIM policy was illusory, and that Viking was estopped from denying UIM coverage based on the illusion of coverage it created, nevertheless, cited Wood and held that offset provisions are permissible, so long as the amount of available UIM coverage exceeds $25,000/$50,000, the amount of liability coverage required by Idaho law.

Therefore, Pena in no way invalidates an insurer’s ability to offer and enforce its offset coverage provisions, so long as the UIM coverage limits exceed $25,000/$50,000. Ironically, Pena created UIM excess insurance for UIM policies providing minimum UIM limits of $25,000/$50,000, regardless of the tortfeasor liability limits; however, if the insured purchases UIM limits exceeding $25,000/$50,000, the offset/reduction provisions approved in Wood may eliminate UIM coverage.

Conclusion

Remember this is the “Readers Digest” UM/UIM version of War and Peace and the specific UM/UIM policies must be reviewed for an informed coverage analysis. I invite any questions or comments regarding this article, but first read the policy!