Articles Posted in Uninsured and Underinsured Motorist Claims

The biggest distinction between filing a lawsuit against an individual for a car accident and filing an uninsured/underinsured motorist claim (UM/UIM claim) against an insurance carrier is that the latter will be sent to arbitration for adjudication. Illinois law requires insurance companies to include arbitration clauses in all insurance contracts containing UM coverage (215 ILCS 5/143a). Additionally, many insurance companies have arbitration clauses in their UIM insurance contracts. Illinois utilizes arbitration as a means of providing a more efficient means for those with a UM/UIM claim to have their case heard and have a just decision reached. Medical bills from a car accident add up quickly. The sooner a result can be obtained, the better.

To initiate the arbitration, the insured’s counsel must send a written demand for arbitration to the insurance company. The demand for arbitration is akin to filing a lawsuit. The demand must be clearly stated and sent within the time specified by the insurance policy. The demand should include information about the insured and name the insured’s arbitrator. The Insurance company will then name their own arbitrator. Then, both arbitrators will select a third “neutral” arbitrator within forty-five days to complete the panel. If the third arbitrator is not selected within the allotted time, either party may request that the case be sent to the American Arbitration Association (AAA). Some insurance contracts provide that all UM/UIM arbitrations be sent to the AAA. When the AAA hears the arbitration, they may choose to use a single arbitrator, or a panel of three.
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A setoff is a defense to a legal judgment for damages. A setoff can be either partial or total. When an insured party is making a claim against their insurance company for an Uninsured/Underinsured Motorist claim (UM/UIM claim) for an auto accident, bike accident, or pedestrian accident, the amount awarded in the claim may be reduced or “setoff” by any amount already covered from the at-fault motorist. A setoff is used to prevent double recovery, as compensatory damages are designed to make a person whole, not to punish the other party or provide a windfall for the insured.

A setoff often applies in an underinsured motorist claim. Recovery from the underinsured motorist is deducted from an arbitration award against the underinsured motorist carrier to prevent double recovery. For a setoff to be considered, the insurance company must submit the claim to the arbitrator. Unlike issues involving coverage, which are the domain of the courts, any disputes over damages must be presented to the arbitrator or they are considered waived.
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The decision in Nicholson v. State Farm Mut. Ins. Co. is a win for automobile insurance policyholders in Illinois. It also imposes a new obligation on insurance carriers to obtain a signed coverage election form before binding coverage, when the insured makes a “material change” in the policy.

The Illinois Supreme Court has denied an appeal by State Farm Insurance, thus, allowing to stand the decision of the Illinois Appellate Court in Nicholson v. State Farm Insurance, No. 2-08-0639 (2nd Dist. 2010) construing the obligations of an insurance carrier to provide underinsured motorist coverage pursuant to Section 143a–2 of the Illinois Insurance Code (215 ILCS 5/143a–2 (West 1998). Under the decision, “whenever liability coverage is increased above that provided under the previous policy, insurers must again offer UM (“uninsured motorist”) coverage equal to liability coverage and obtain a signed election declining such equal coverage.” The decision represents an expansion of consumer rights for purchasers of automobile insurance in Illinois in those instances in which UM coverage is elected in amount that is less than the amount of BI (“bodily injury liability”). Previous to the decision announced in Nicholson, only new “applicants” (not existing insureds) were required to be given an offer of coverage. Now, every insured must sign an election of coverage form before any material change in the policy is made, assuming they are selecting coverage for UM that is less than BI.
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