When dealing with legal matters, time is almost always of the essence. Statutes of limitation are the most obvious example, but all sorts of time deadlines apply to virtually everything related to the law and preservation of rights. However, at least one exception to the world of strict legal deadlines is the underinsured motorist (“UIM”) claim.
An UIM claim concerns a policyholder seeking recovery from his or her own automobile liability carrier for that portion of his or her damages caused by another negligent driver which exceeds the automobile liability policy limits of the negligent driver. For example, an insured with $100,000 in UIM coverage suffers $50,000 in total damages due to the negligence of another driver, who only has a $25,000 per person automobile liability insurance limit. To obtain fully recovery for his damages, the UIM claimant may first recover the total $25,000 policy limit from the negligent driver then recover an additional $25,000 from his own UIM coverage to satisfy his total claim of $50,000.
An UIM claim is not to be confused with an uninsured motorist (“UM”) claim, in which a policyholder seeks recovery for the total loss from his or her own automobile liability carrier for damages incurred to the policyholder caused by another negligent driver who has no liability insurance.
While both UM and UIM claims are governed by the same statute in California, only the UM claim has specified time deadlines by which the insured must submit his or her claim to their carrier. In contrast, a UIM claimant has no such clear deadline. The following explains the statutory basis for this anomaly and the current state of California law on the topic.
- Applicable Statutes
California Insurance Code §11580.2 provides in pertinent part:
(i)(1) No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within two years from the date of the accident:
Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction.
Agreement as to the amount due under the policy has been concluded.
The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested. Notice shall be sent to the insurer or to the agent for process designated by the insurer filed with the department. [Emphasis added.]
The foregoing portion of Section 11580.2, with its two-year limitations period on actions by an insured, applies to UM claims only. In contrast, subdivision (p) of Section 11580.2 applies to UIM claims and reads as follows:
(p)This subdivision applies only when bodily injury, as defined in subdivision (b), is caused by an underinsured motor vehicle. If the provisions of this subdivision conflict with subdivisions (a) through (o), the provisions of this subdivision shall prevail.
(2)“Underinsured motor vehicle” means a motor vehicle that is an insured motor vehicle but insured for an amount that is less than the uninsured motorist limits carried on the motor vehicle of the injured person.
(3)This coverage does not apply to any bodily injury until the limits of bodily injury liability policies applicable to all insured motor vehicles causing the injury have been exhausted by payment of judgments or settlements, the proof of the payment is submitted to the insurer providing the underinsured motorist coverage.
. . .
(6) If the insured brings an action against the owner or operator of an underinsured motor vehicle, he or she shall forthwith give to the insurer providing the underinsured motorist coverage a copy of the complaint by personal service or certified mail. All pleadings and depositions shall be made available for copying or copies furnished the insurer, at the insurer’s expense, within a reasonable time. [Emphasis added.]
Thus, a distinction is made in Section 11580.2 between UM and UIM claims. Subdivision (i) of the statute applies to UM claims, while subdivision (p) applies to UIM claims. Further, as stated therein, if any portions of subdivision (p) for UIM claims “conflict” with subdivisions (a) through (o), then subdivision (p) “shall prevail” per the terms of the statute. Notably, subdivision (p) does not provide a statute of limitations for an UIM claim.
- Applicable Case Law
The California Supreme Court analyzed both subdivisions (i) and (p) of Insurance Code Section 11580.2 and concluded the two-year statute of limitations does not apply to UIM claims. Quintano v. Mercury Casualty Company (1996) 11 Cal.4th 1049. Specifically, Quintano held section 11580.2(p)(3) was in conflict with, but prevailed over, section 11580.2(i). Accordingly, there is no explicit statutory limit on the amount of time the insured may take to pursue an underinsured motorist claim once the third party’s insurer has paid the insured. “Because the insurer has no need to protect its subrogation rights or to fear double recovery on the part of its insured, it is implausible to suppose that the Legislature intended former subdivision (i) [with its then-one year limitations period] of section 11580.2 to apply in the underinsured motorist coverage context.” Id. at 1061. Thus, the two year time period for UM claims set forth in subdivision (i) of Section 11580.2 does not apply to UIM claims, which as a result has no clear cap on timing.
Perhaps the only bright spot in Quintano for UIM carriers was the Court’s dicta suggesting an UIM claim must be brought within a “reasonable time” following conclusion of the claim or suit against the third party and the insurer possibly having an equitable remedy for an insured’s unreasonable delay in presenting the claim. Id. at 1064 (citing Ins. Code § 11580.2(p)(6)). The latest version of section 11580.2(p)(6) requires the insured to “forthwith give to the insurer providing the underinsured motorist coverage a copy of the complaint by personal service or certified mail.” Ins. Code § 11580.2(p)(6).
Each policy must be examined to determine if any additional language is provided related to the timing of UIM claims. In our experience, most automobile policies follow the language of Section 11580.2 and therefore do not have an explicit time limit for filing UIM claims. Equitable considerations may provide grounds to challenge unreasonably late claims (e,g., the staleness of evidence, etc.). Specific policies may also have contractual limitations periods upon which carriers may rely. However, with respect to the statutory bases for UIM claims in California, the two-year limitation period generally applicable to UM claims does not apply to UIM claims. Thus, carriers should not deny UIM claims for violation of a two-year time limit without further analysis of applicable specific policy language and possible equitable considerations that could make an unreasonably late claim unjust.
ABOUT THE AUTHOR: Mark Petersen is senior counsel at Tyson & Mendes LLP. He specializes in personal injury, insurance coverage, and bad faith litigation . Contact Mark at 858.263.4111 or firstname.lastname@example.org.
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