Wednesday, October 26, 2011

Auto Insurance 101: Full Coverage is not the same as Good Coverage

Many, many times in my 18 years as a lawyer I have heard people say that they have “great” automobile insurance coverage because they were forced to buy “full coverage” when they took a loan out on a car.  However, “full coverage” is only half of the equation. 

The term “full coverage” usually means that a policy includes collision coverage.  Collision coverage will pay for damage to your car no matter who is at fault, so, if you run a red light and cause an accident, collision coverage will make sure that the lien holder on your car will get some money.  This amount may not be enough to pay off your loan, but that is another topic.

The fact is, in Oregon, full coverage simply means that a policy has some collision coverage.

Full coverage describes the type of insurance bought.  Another issue entirely is the amount of coverage purchased.  The minimum policy coverage in Oregon (and thus, the cheapest) for liability and uninsured motorist coverage is $25,000 per person, $50,000 per accident.  This means that, if you cause an accident, your insurance company will protect you UP TO A TOTAL of $25,000 per injured person, or UP TO A TOTAL of $50,000 per accident.  If you cause damages in excess of these amounts, you will have to pay the extra.

Personal injury protection coverage pays for your own medical expenses if you are in an accident, up to a maximum of only $15,000.

These minimum policy limits were set by the Oregon Legislature at a time when medical expenses were a small fraction of what they are today.  The statutory limits have not kept up with the rising costs of health care.  Today, a trip on Life Flight can easily cost $15,000 to $20,000, wiping out your entire PIP policy.  A serious injury can result in a hospital stay costing tens of thousands, or even hundreds of thousands of dollars.

As most drivers have a minimum policy, it becomes clear how important it is to protect yourself.  Thankfully, you can protect yourself through uninsured and underinsured motorist coverage.  Underinsured motorist (UIM) coverage is insurance coverage that you buy on your own policy, and requires your insurance company to pay for the difference between the at fault driver’s liability policy (often $25,000) and your own UIM limits.  For example, if you are hit by someone with a minimum policy of $25,000, and you have purchased $100,000 of UIM coverage, after the at fault driver’s insurance company has paid its $25,000, your own insurance company will provide an additional $75,000 in coverage, to bring your total coverage to $100,000.

UIM coverage is some of the most important and least expensive coverage that you can buy.  The difference in premium between a $50,000 UIM policy and a $300,000 UIM policy is often fairly insignificant.  However, in the event of an accident, this extra coverage becomes extremely important.   I cannot count the number of cases that I have handled in which a good UIM policy makes all the difference to the victims of a horrific accident.  A policy with minimum or low limits, even if it is a “full coverage” policy, can leave a family financially ruined.

Talk to your insurance agent and make sure that you are protected.

What Juries DON'T Know Can Hurt

These must be the questions on every juror’s mind:  Why is the individual who caused the auto accident being sued?  Don’t they have insurance??  Why is the Plaintiff suing this poor Defendant, instead of an insurance company???  Well, here’s the answer:  IT IS THE INSURANCE COMPANY!! 
Under Oregon law, a Plaintiff who is injured in an auto collision must name the individual who caused the accident in a lawsuit.  But, in reality, that person’s insurance company is usually paying the bill for whatever the jury awards.  It’s one of the most frustrating parts of our jobs, because we have to name the individual, but it’s insurance money that’s paying the bills.  Which, as we all know, is what insurance is for! 
When a jury awards money to an injured plaintiff, the defendant’s insurance company has to step up and pay the verdict amount.  But, under Oregon law “liability insurance” is not even allowed to be mentioned, because it could prejudice the jury and make the jury want to award more money because it’s an insurance company.  How’d that happen?  Insurance companies have much more powerful lobbies in the legislature than individuals do, and they’ve made it their goal to do everything they can to avoid paying out on claims.  So, they’ve gotten the legislature to pass laws that make it impossible to tell juries who’s actually going to be paying whatever they award as a verdict. 

BROTHERS, HAWN & COUGHLIN CAUSE GEICO INSURANCE TO PAY BENEFITS OWING TO ITS INSURED

A young man who suffered serious injuries, when he was driving an automobile insured by Geico Insurance, was denied PIP benefits available under the insurance policy.   PIP benefits are amounts which an insurance company is obligated to pay for medical expense and loss of wages incurred in a motor vehicle accident, regardless of who is at fault.

Brandon Sheptow was driving his mother=s car with her permission, when another driver failed to yield the right of way, and ran into the car.  Geico refused to pay PIP benefits because Sheptow was not living in the home of his mother at the time of the collision.  In denying coverage, Geico ignored an Oregon statute which requires that any person who is driving a motor vehicle in this state, with the permission of the owner, is an insured under the policy.  Instead, Geico argued that an extension of coverage to family members living at home was actually a limitation on coverage, and if a family member does not live at home, he or she is not covered.

Sheptow came to attorney Bruce Brothers after other attorneys had refused to assist him.  Brothers decided that what Geico was doing was wrong, and filed suit against Geico.  The trial court agreed with Brothers, Geico appealed and Geico lost on appeal.  Geico will be obligated to pay both the PIP benefits owing and the attorney fees incurred by Sheptow. 

After Brothers filed his case, he was contacted by numerous other attorneys across the state who had clients in the same circumstance.  They had been injured when driving a vehicle insured by Geico and it refused to provide benefits because the injured person was not living with the owner of the car.  Geico insureds across the state of Oregon will benefit from this decision.

Geico, through its green lizard, talks about how much money can be saved by changing to Geico.  What that company does not tell you is that if you are injured, it will do everything possible to avoid paying the benefits to which you are entitled.  Geico told its insured that no benefits were available for the injuries suffered by Brandon Sheptow.  The Oregon Court of Appeals said otherwise, agreeing with the position taken by Brothers, Hawn & Coughlin which provided services without payment by their client in anticipation of ultimately being paid by Geico for its wrongful denial.

The Court of Appeals opinion is here: Sheptow v. Geico, OrApp # A144862 (10/12/2011)