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How to buy Motor Vehicle Insurance, Part Two
For Part One, please see the April Newsletter at this link: . This month we will complete our tips on buying motor vehicle insurance with some advice to seek quality in order to protect yourself, your family, and your passengers.
You Get What You Pay For
You have heard the advertisements that one auto insurance company is the least expensive, etc. Understand that truth of the old adage applies to insurance policy purchases: you get what you pay for. The best company is probably not the cheapest. How can company policies that save premium costs have adverse impacts upon your wallet?
First, the reason a company is cheaper is that it doesn't pay out as much as another company, nor does it provide as much service. If your own company does not pay out in a fair manner, and if you are the defendant in the case (the tortfeasor), expect that your chances of being involved in a lawsuit are much higher than if you were insured with another (quality) company.
Since insurance is going to foot the bill anyway, why should that impact you? Well, you'll have to be inconvenienced at home, at work, and at trial. You'll be sued; you will have to take time off of work to see the attorney who will be hired by your company to represent you; and you'll have to testify at depositions and/or trial. Remember, you will not be paid lost wages to participate in your own defense. But in addition to the time involved, it can be very stressful to be in a lawsuit. You will have to answer under oath regarding a number of topics, and your spouse may also have to participate.
However, the biggest impact of adverse treatment to claimants by your own insurance company may not come when you are a defendant, but may come when you are a claimant versus your own company. This could be as a claimant under your own policy, either for payment of medical expenses or payment of wage loss under the Personal Injury Protection (PIP/MedPay) provisions, or for underinsured/uninsured UIM coverage.
It is in these circumstances that many first party carriers become aggressive and literally cheat their own insureds out of legitimate payments. Most consumers have little knowledge of these practices, and aggressive companies are almost always successful in cutting off PIP payments for treatment far earlier than your own doctor would recommend. That is where they make the money and that's where you'll find yourself in need of some help.
The company will respond that you have the right to arbitration. But no attorney is going to become involved in a Personal Injury Protection/Medical Pay (PIP/MedPay) arbitration. There is not enough money at stake to merit the time and effort. You can be at the mercy of the company, so select wisely. In this respect, the least expensive coverage may be no bargain at all.
Be aware that the first party carrier that advertises the cheapest price is likely the one who will deny payment for medical coverage sooner than the other carriers. They can be quite aggressive in this respect as described in all of the IME, Medical Care and the PIP/MedPay sections of our member's site. They will use the ruse of a "records review" or an "independent" medical examiner (IME) to deny payments due to your own doctor/chiropractor for your continued reasonable and necessary care. The so-called "independent" doctor they select is hired by the insurance industry to (nearly always) say that you "have reached maximum medical improvement, and no further treatment is necessary."
The same type of carrier is also the one that will likely seek to limit your recovery on UIM by requesting arbitration more frequently than other carriers. These claims involve all of the damages you would expect to recover from the tortfeasor, including general damages. Thus, there can be quite a bit of money at stake, since general damages are usually a multiple of the cost of your medical care.
In evaluating UIM coverage, see if you can find out from your State Insurance Commissioner what percentage of claims are settled, mediated, arbitrated, or tried to a jury (this jury trial clause is inserted by only a few companies). Does your Insurance Commissioner have any idea how often a carrier forces its own insureds into arbitration, rather than agree to the more desirable non-binding mediation forum? Arbitration and mediation usually involve attorneys who are knowledgeable in personal injury matters as mediators or arbitration panel members.
Or, worse, do they force their own UIM claimants to go into court and present their claim to a jury?
Do you have the right to choose arbitration in UIM? Is your company deceiving you with a clause that removes your rights to arbitration? Here is a Specific Question for the Sales Representative Regarding Forcing You to a Jury Trial
Please check your policy and ask the sales representative to be sure that your carrier does not reserve the right to a jury trial in its UIM disputes.
The tricky little phrase used in policies issued in recent years was to the effect that "disputes hereunder will be resolved by arbitration, unless either of the parties elects to have the dispute resolved as in other civil matters". You probably would not see anything wrong with that phrase, but it is deceptive in its apparent innocence. It is a powerful tool and will only benefit the insurer.
That little phrase was intended to give the insurance company the right to a jury trial in resolving your UIM dispute with your own company. If you and they disagree, you will not have the right to an arbitration; they will just tell you to go file a court action. And the insurer will always ask for a jury trial.
Why don't you want a jury trial? First, you will have to pay to use the court system. You must file the lawsuit, and you will have to serve it (although they will likely accept mail service). Second, there is likely a much longer wait (currently one and a half to two years is common) for you to obtain a jury trial date than there would be to put together an arbitration panel of attorneys. Who wants the delay? The insurance industry makes a lot of money on investments, whereas you will always need the cash to make up for some of the problems caused by the accident. So they want the delay.
Third, it is tremendously more expensive than any other forum for resolution in your time and your costs. In arbitration, you can submit medical records to be read by the arbitration panel, and perhaps call just one of your doctors. You will pay for any time your doctor has to spend in preparation and testimony, so you will want the less formal proceeding (such as arbitration) because her fees will be a fraction of those at trial.
At a jury trial, you must present some live testimony from your doctors. (Although some records can be admitted without the doctor present, attorneys usually want the doctor present to speak to the jury; whereas at UIM arbitration, the attorney knows that the panel of trail attorneys will have some familiarity with the medical specialty, medical terms, prognosis, etc., and your attorney therefore can simply admit the records and argue from them.) The jury testimony of your doctor is expensive, because you will likely pay their full time away from the office, including courtroom waiting time, regardless of the results. It is a delay of a year or two, depending upon your jurisdiction, and it takes a much greater effort to succeed with higher risks than at arbitration. Therefore, the company knows that you are more likely to compromise and accept a lower award than if you went to arbitration. So please consider this an important issue in selecting your company.
Think Preventive-Protect Yourself, Your Family, and Your Passengers
We've seen far too many cases where the insured, in an effort to save a dollar up front, has left himself, his family, or his passengers exposed with no coverage at all for medical bills. Insurance is a good investment; it is necessary; and, it should be purchased in anticipation of traumatic events. How can you foresee only limited consequences of an accident? You can't.
Here are two examples of places where we have seen insureds deprive themselves of necessary coverage. The first and most obvious is PIP/MedPay. Insured people who have a good medical plan, an HMO, or who are covered through the military, often think they will rely on their medical plan and decline to take PIP/MedPay. This is a serious mistake.
Often, medical plans (or military) do not afford anything more than the long gray line of institutionalized medicine, where treatments and referrals are very limited. By contrast, your own PIP/MED PAY allows you to select your own doctor, chiropractor and other health care professionals such as specialists, with much more freedom of choice. Moreover, PIP also pays a portion of your wage loss (MED PAY does not). It would be an error to pass by a chance to purchase PIP.
Please note that your HMO or health plan or military access affords no protection whatsoever for your passengers. What will you tell the parents of the children who were riding with your child on an outing when you cannot cover their medical expenses because another person hit you?
Think About it: You Need to Buy Insurance to Protect Yourself, Family Members, and Passengers by Purchasing Underinsured Motorist Coverage (UIM)
One serious mistake is to decline UIM coverage. Some companies require that you purchase UIM in the same amounts as the liability insurance. However, many companies, depending upon state law, are authorized to sell denominations of UIM coverage less than the liability limits. The insured thinks that he is providing some satisfactory minimal coverage for his family and decides to save some money with lower UIM limits. However, UIM is probably the most important place to spend money.
You are not as likely to cause an accident, as you are to be a victim of an accident. At least if you are taking the time to read this article, you are probably a person who will exercise more care and judgment in your driving than the ordinary person. Therefore, it is more likely that you will be making a claim against another person for injuries sustained by you at the hand of the third party tortfeasor.
In this case, the tortfeasor may (but likely will not) have sufficient insurance to cover you and your passengers for all of your medical expenses, wages loss, and general damages. If not, then the tortfeasor is said to be "underinsured". In that instance, the balance of the value of your claim, above the bodily injury policy limits of the tortfeasor, is the responsibility of your own company's UIM coverage.
A third possibility is if the tortfeasor is uninsured. This is a distinct likelihood if someone who is reckless, or who has a drinking problem or who is driving with a suspended license involves you in their traffic habits. They caused you and your passengers harm, but they have no insurance. You will be making your entire claim under your UIM polity limits.
All too often, we have seen serious injuries to individuals and their families receive little or partial compensation because the insured elected to "save money" by not purchasing the maximum UIM coverage available to him. Purchase as much UIM coverage as you can.
A word of caution in dealing with your insurance company: don't try to fool them on any of the information requested, or by insuring only one driver for each of the family vehicles. We have numerous cases holding that one family member is not covered because he or she was not named as a driver of another family vehicle. Questions of whether the vehicle was "available for the regular use" of any individual are complex issues, and history tells that you will lose. Disclose the full number of drivers and you will have the knowledge that you and family members are covered.
The same thing pertains to marital status and student status of children. Our recommendation is to be honest in your application and in your relationship with your company. The few dollars you "save" otherwise will never be a bargain should you loose out in the long run. A contract entered into with materially fraudulent representations can be voidable by the company under some circumstances. In that case, you would have no coverage at all.
Table of Insurance Coverage Requirements, by State
Most states require that you have liability insurance. This covers you when you're at fault in an accident. If you live in New Hampshire, South Carolina, Tennessee or Wisconsin, you aren't required by law (yet) to have liability coverage. For the rest of us, the mandatory coverage varies according to state. In the chart below, minimum liability limits are read as follows (in thousands of dollars): bodily injury liability for one person in an accident/bodily injury liability for all people injured in an accident/property damage liability for one accident.
So, for Alabama, the minimum requirements are $20,000 of bodily injury liability for one person, $40,000 bodily injury liability for all people and $10,000 property damage liability.
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