Underinsured Motorist Insurance Coverage in California

June 30, 2011

Recently proposed legislation that suffered a procedural defeat in the Insurance Committee of the California State Assembly aimed to provide California’s insured drivers with benefits of underinsured motorist benefits up to the full amount of their limits. AB 1063, which was sponsored by Assemblyman Steven Bradford, sought to correct a more than thirty year old provision in the California Insurance Code, that allows insurance companies to take an “offset” for funds recovered from an at fault party’s insurer, thus reducing the actual coverage provided by one’s underinsured motorist policy.

To illustrate the proposed impact of the bill, assume that a victim suffered $200,000 in damages after a car accident with a driver who had automobile insurance liability coverage limits of $50,000 per person, and no more than $100,000 for any one incident. Assume further that the victim had her own automobile insurance policy that provided uninsured-undersinsured motorist coverage of up to $100,000 per person, and no more than $300,000 per accident. Under current California law, the maximum amount available for recovery under the underinsured portion of the victim’s own insurance policy is $50,000 (the $100,000 in total underinsured coverage, minus the $50,000 recoverable from the at fault party) for a total recovery of $100,000.

Under the proposed legislation, California law would have allowed a victim to recover the entire limits of their underinsured motorist coverage without an offset for the coverage obtained from the at fault party. This change would have provided the victim in the example with $150,000 in total recovery ($50,000 from the at fault party and the full $100,000 limit from the victim’s own policy).

Despite the California Insurance Commissioner’s testimony before the Insurance Committee confirming that the enactment of the bill would not significantly raise insurance rates for California drivers, the power of the insurance lobby prevailed the bill was sent for interim study – a procedural maneuver that generally stops the bill in its tracks.

While this attempt to increase protections for consumers, and give insureds the full value of the coverage they pay for, has failed, it serves as a learning tool to all drivers to make sure they understand the scope and limits of their coverage, so that they are adequately covered in the event of an accident – whether it is their fault or the fault of another.

If you were injured in an automobile collision, contact one of our Orange County car accident attorneys today to schedule a free consulation.