Attorney examines current issues in auto insurance

By Roberta M. Gubbins

Legal News

"One of the hot issues among plaintiff's personal injury lawyers are coverages," said Steve Hicks at a recent Luncheon Lecture sponsored by the Ingham County Bar Association held at the State Bar of Michigan in Lansing.

"In Michigan you have to show serious impairment of bodily function in order to recover non-economic loss in a motor vehicle accident case. For the last six years, that has been the most restrictive interpretation of threshold that we have ever had.

"Because of tort reform in the '90s, there was a new threshold adopted, which defined what serious impairment of bodily function really meant. Basically it is an objectively manifested impairment of an important body function that affects the injured person's general ability to lead his or her normal life. The first part is relatively easy--objectively manifested impairment--meaning if it shows up on any testing. Important body function is a 'no-brainer'--use of the back, an arm, leg or brain, for example.

"The real rub in this new tort reform is the phrase 'that affects the injured person's general ability to lead his or her normal life.' It is a combination of factors--and is a subjective test. What is general ability?

"As a result of numerous appeals, the Supreme Court held that the impairment must affect the course or trajectory of a person's life, which is a broad ruling." The problems arose around what degree of injury affected the course or trajectory of a person's life--there may be pain, but the individual could still work--is that affecting the course or trajectory of a life?

"We got to the point," Hicks said, "where cases that normally would settle for six figures would not cross threshold anymore. At this point, coverage was not an issue. But with the changes in threshold under the new case of McCormick v Carrier, there will be more and more focus on 'how much liability coverage does a person have?'"

The issue that has arisen on coverage has been the existence of 'step-downs' in a policy. A 'step-down' is any provision that typically shows up as an exclusion that will reduce the amount of liability coverage that you have in certain situations. In Michigan, the step-down will be to the statutory minimum limits--$20,000 per person; $40,000 per accident. For anyone with a serious impairment of bodily function, $20,000 will not be enough.

The insurance companies will 'step-down' the amount of coverage that the person has written in the declarations. Step downs usually show up in the exclusions section of the policy. Certain companies in Michigan don't offer coverage for the 'under-insured,' which is a claim against your own company when the driver that hit you did not have to compensate you for your injuries. For example he has only $20,000 so you could pick up the difference to $100,000 on your policy.

"With 'step-down' found in the exclusion section, for the uninsured, which is defined, they only give the statutory amounts of $20-$40,000. More often they will describe certain situations where your coverage is reduced to the statutory minimums required by the state in which the accident occurred. To find that amount, one would have to look at the statute setting them for each state.

"What are the scenarios where 'step-downs' occur? The primary ones are the resident relatives living in the house who only occasionally drive the car--a college student. In the situation where your child is driving, an accident occurs, and you are injured. In that situation, the coverage could be the statutory minimum." This means that regardless of the amount of injury, $20,000 (if the accident occurs in Michigan) is the maximum amount of recovery regardless of what is stated on the declarations page.

Often the parties will not challenge the insurance company due to the costs and time of litigation so "insurance companies know these (step-downs) work." There are others such as permissive driver--anyone you give permission to drive your car.

"How do you fight step downs? While it is harder to attack the policies that say $20,000, it is easier to challenge the ones that use obtuse language such as limiting to the coverage in each state in the exclusions rather than on the declarations page. Those are more likely to fall."

Hicks also noted that some policies have a two year statute of limitations written in the policy, which must be followed. "The real problem is when settlement issues delay filing of a claim and the insurance company won't consent to the delay."

Hicks practices in the areas of negligence/personal injury and labor and employment law. He specializes in providing legal representation to injured or disabled persons, assisting them in recovering insurance benefits and in seeking damages from the parties responsible for injuring them.

Hicks serves on the executive board of the Michigan Association for Justice and on the Council of the Negligence Law Section of the State Bar of Michigan. He is a member of the American Bar Association's Tort Trial and Insurance Practice Section, the Association of Trial Lawyers of America, and the Ingham and Eaton County Bar Associations. A graduate of the University of Michigan Law School, Hicks is licensed to practice law in Michigan and Illinois. He can be reached at (517) 881-5564.

Published: Tue, Nov 2, 2010

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