How to Turn a $25,000 Insurance Policy into $100,000
The minimum limits of automobile bodily injury liability insurance are $25,000 per person/$50,000 per accident. Those limits go up to $30,000/$60,000 on January 1, 2011. However, people with severe injuries often find these minimum limits do not cover all their medical bills, lost income, pain and suffering and other damages. What can you do?
First, to protect yourself, buy uninsured/underinsured motorist (UIM) coverage. UIM coverage pays your damages when the other driver has no insurance or too small a policy. Everyone should have at least $50,000 in UIM coverage, and more if you can afford it (your UIM coverage cannot exceed your liability coverage, so that is a consideration).
However, there is a legal doctrine that can actually make an insurer liable for more than the limits of coverage. The “Stowers Doctrine” provides that insurance companies that negligently reject an unconditional offer of settlement within the limits of coverage may be held liable for the entire judgment.
If that sentence was complicated and hard to follow, don’t feel alone – many lawyers do not know the ins and outs of this doctrine! However, for those of us who work in personal injury law, it is a tool we use in selected cases. In order to set up a “Stowers claim,” the plaintiff (injured person) must offer to settle all claims against the insured for the amount of the coverage.
This can be a calculated gamble, particularly if there is any chance of collecting a judgment in excess of the policy limits from the insured. There may be other stakeholders in your claim, such as health insurers who claim a right of reimbursement or “subrogation,” who will have to be paid out of the settlement if the insurance company accepts the offer. You should also make sure you have written permission from your UIM carrier. Otherwise, you will be violating a provision of your policy and may not be able to recover UIM benefits.
This doctrine is not actually implemented unless the offer is rejected, and you go to court and obtain a judgment in excess of the policy limits. If the defendant cannot pay the amount of the judgment in excess of his policy limits, you have the right to file a second lawsuit against the insurance company. If you prove the insurer was negligent in failing to settle, you can recover the balance of the judgment from the insurer, even if that amount exceeds the policy limits!
You cannot turn a $25,000 case into $100,000. However, if you have a $100,000 case, and the responsible party has only $25,000 in coverage, there is a strategy to try to collect the entire amount.