The main purpose of auto insurance is to protect you, your family and the passengers in your vehicles if you are seriously injured in an automobile collision. Two of the most important protections you can purchase are Uninsured Motorist Coverage (UM) and Underinsured Motorist Coverage (UIM). These coverages protect you when a negligent driver either doesn’t have insurance or doesn’t have enough to cover your injuries. What makes UM and UIM coverages so special is that they cover you whether you are driving a vehicle, riding as a passenger, biking or walking as a pedestrian.

The Basics of Underinsured and Uninsured Coverage

If you are in a car accident, and the party at fault has inadequate coverage, your own underinsured coverage comes into play. For example, assume you are in an accident where another driver is at fault, and you suffer injuries that should be compensated at $100,000. Also, assume the “at fault” driver has $75,000 in liability coverage, and you have UIM coverage of $50,000. Under many policies, you would be able to recover only the $75,000 under the “at fault” driver’s policy, and nothing from your own UIM coverage.

Common sense tells you the other motorist is indeed, “underinsured”, as he or she doesn’t have enough insurance to fully compensate you for your injuries. However, many policies define an “underinsured” motorist as merely having less liability coverage than your own underinsured coverage. Thus, in the example above, if you had $100,000 of UIM coverage, rather than $50,000, you could be compensated to the full extent of your injuries.

The solution? Check your own policy and see how it defines “underinsured” motorist. If the definition is similar to the example above, you might want to raise your underinsured coverage substantially. It is relatively inexpensive and it is for your family’s protection.

Sometimes a party at fault has no insurance coverage. Then your own uninsured coverage should provide you compensation. Sometimes, however, an insurance company is hesitant to fully compensate even its own insured for his or her injuries. It can then become necessary to hire an attorney to obtain a complete recovery.

Reducing Clauses and Anti-Stacking Provisions

Beginning in 2010 Wisconsin became the 49th state to require drivers to have some form of liability insurance (New Hampshire is the lone holdout). This change in the law reduced the risk of you being injured by an uninsured driver but it did not eliminate it. Many people who have lost their license drive anyway and therefore you still could be injured by an uninsured driver. In addition, the $25,000 minimum liability is often insufficient to reimburse someone for injuries they suffer in an accident.

The law here in Wisconsin also allows insurance companies to put “reducing clauses” and “anti-stacking” provisions in insurances contracts which can substantially decrease the UM and UIM benefits you presently have. “Reducing clauses” and “anti-stacking” sound very legalistic, but these provisions can have a great effect on people injured in car accidents. The best way to explain how these provisions work is by example.

Suppose you are severely injured in an accident and have medical bills of $1 million. The negligent driver who hit you has a $250,000 policy. You have also purchased two UIM polices each with $300,000 in coverage. Without the reducing clauses and anti-stacking provisions you could recover $850,000 in medical expenses: $250,000 from the negligent driver and $600,000 under both UIM policies – the amount of insurance you have actually purchased and included in your premiums.

With the reducing clauses and anti-stacking provisions you could recover, at most, $300,000. The $250,000 policy from the negligent driver, and only $50,000 under one of your UIM policies. This is because the insurance company is allowed to subtract the negligent driver’s policy amount and only pay on one UIM policy.

In real terms, that is a difference of $550,000! This money could be the difference between having to file bankruptcy and having the ability to pay for all of the care you need.

How Can Consumers Protect Themselves From These Anti-Consumer Provisions?

Wisconsin insurance consumers can protect themselves and their family by meeting with their agent and requesting the specific coverage they need, and affirming the special nature of their relationship with the agent. When consumers do this, the insurance agents have a duty to fulfill the insureds’ requests and secure the coverage. If the agents do not secure the requested and agreed-upon coverage, they may be liable to a person who does not have the coverage he or she requested.

Here is a list of things insurance consumers can do that will help protect them:

1. Review your policy. See if your policy includes reducing clauses and anti-stacking provisions.
2. When you get a renewal notice, contact your insurance agent and review in person all changes in circumstances before each policy renewal.
3. Make specific requests for coverage to the agent. Tell the agent your specific needs for insurance coverage: i.e., how much coverage you want to purchase for liability, UM/UIM, medical payments coverage, etc. If possible, indicate that you do not want any reducing clauses or anti-stacking provisions.
4. At or immediately after the meeting with your agent, get the agent’s agreement to insure you and your family at the levels selected. This confirmation is best done in writing.
5. If you do not have reducing or anti-stacking clauses tell your insurer that you want the same coverage you have now. If the agent or company tells you they cannot provide the same level of coverage, then ask for an endorsement that will reinstate the UM and UIM coverages and benefits you currently have. Again, document this in writing. If your agent or company tells you they are not willing to give you these endorsements, or charge a substantially higher premium for the exact same coverage you have now, then look for another company who will.

If insurance consumers follow the above suggestions, they are more likely to create a “special relationship” with an insurance agent that can make the agent liable if the agent does not provide the specific insurance coverage requested.

[Special thanks goes to Ruth Simpson of the Wisconsin Association for Justice for her contributions toward this article.]

Bob Duxstad practices personal injury law in both Green and Lafayette Counties in Wisconsin. He can be reached by e-mail at duxstad@swwilaw.com.