Uninsured Motorist Coverage Done Right
October 9, 2009
Earlier this year, a doctor was walking across the street when he was run over and killed by an uninsured drunk driver. Although his car was covered by a good policy with high uninsured motorist benefits, his widow and children received none of those benefits.
We often see business people who, while attempting to protect themselves from the liability which motor vehicles present, exclude themselves and their families from very valuable insurance protection for which they are paying.
Where we see this situation the most, is in closely held corporations and in the practices of professionals such as lawyers, doctors, dentists, etc. These astute individuals realize that motor vehicles present a potential liability whenever the vehicle may be involved in an accident, regardless of whether the principal or an employee is driving.
Therefore, the ownership of the vehicles is held in a corporate name so that liability can be limited to the corporate assets and those of the at-fault individual driver of the vehicle. The business routinely purchases a large insurance policy to protect the corporation or its driver from claims arising from at-fault accidents. This is a sound practice, except for some unforeseen consequences when the business principal or a family member is injured by an uninsured or under-insured motorist.
In Florida, by statute, UM coverage is presumed to be at the same limits as the liability policy which is purchased. For example, if there is $500,000 in liability coverage, there would routinely be $500,000 in UM coverage to protect against the opposing at-fault driver being under or un-insured. Also, when we purchase uninsured/underinsured motorist coverage (UM), that insurance is personal to the insured. When an Insured or an insured’s family member is injured by an at-fault under or un-insured motorist, the UM portion of the policy becomes available to the Insured and any resident relative living in the household with the Insured. That UM coverage follows the insured and those family members wherever they may be and whatever they may be doing. They are covered under the UM portion of the policy whether they are in the insured vehicle, in someone else’s vehicle, riding a bicycle, a pedestrian, etc.
The difficulty is that in the effort to confine liability to the corporation and the at-fault driver of the corporate vehicle, the protections of the UM portion of the policy are not nearly as broad. Where the business is the Named Insured, only those in the vehicle are covered under the UM policy. There is no coverage for the business principals or their family members when they are in other vehicles, riding bikes, walking, etc. This is because the corporation or other business entity is the Named Insured in the policy of insurance, and they never get injured and have no family members which could also get injured. Premium dollars paid for UM coverage where a business is the Named Insured are essentially wasted.
There is a simple solution. The business principal should be named as a Named Insured in the policy of insurance. The principal doesn’t own the vehicle and is not subject to liability for the harm caused by the vehicle unless the principal is driving. By adding the principal as a Named Insured, they and their family get the benefit of the UM coverage without any additional exposure.
Thanks to Matt Weissing.