Umbrella Policies and Finding Every Available Dollar of Coverage

Published July 12, 2016 · Injury Law Basics

A man is rear-ended on I-675 by a pickup truck and spends three weeks at Miami Valley Hospital. His medical bills alone pass $300,000. The adjuster for the pickup's insurer calls with what she describes as good news: she is prepared to pay the full policy limit. The limit is $25,000.

That phone call is the moment most families learn that a serious injury and a state-minimum auto policy do not fit together. It is also the moment a good investigation begins. In my experience, the difference between a token recovery and a fair one is rarely the strength of the liability case. It is whether anyone went looking for the second, third and fourth policies.

Why the first policy is almost never enough

Ohio raised its minimum liability limits to $25,000 per person and $50,000 per crash at the end of 2013. I wrote at the time about why that increase was still not enough to protect anyone, and nothing since has changed my mind. A single night in intensive care can exhaust a minimum policy. A spinal fusion or a traumatic brain injury exhausts it many times over.

Insurers know this. When the injury clearly exceeds the limit, the adjuster's job becomes getting a release signed quickly, before anyone asks what else might be available. The release she sends will usually discharge the driver personally and, if the language is broad enough, anyone else connected to the crash.

Do not sign it. First find out what else is out there.

What an umbrella policy is

An umbrella policy, sometimes called a personal excess liability policy, sits on top of a person's auto and homeowner's policies. It is typically sold in units of $1 million and costs a few hundred dollars a year. When the underlying auto policy pays its limit, the umbrella picks up the rest of the claim, up to its own limit.

People who buy umbrellas tend to be people with something to protect: business owners, professionals, retirees with a paid-off house, families with teenage drivers. They also tend to be exactly the people who do not mention the umbrella when they exchange insurance cards at the scene. The card in the glove box lists the auto carrier. The umbrella is a separate policy, often from a different company, and the driver may not even remember it exists.

Commercial umbrellas work the same way for businesses. A landscaping company, a delivery contractor or a car dealership may carry a $1 million business auto policy and a $5 million umbrella above it. If the person who hit you was working at the time, that excess coverage may be the most important policy in the case.

The other policies people forget

An umbrella is only one place to look. After a serious crash we routinely investigate all of the following.

• The employer's policies. If the at-fault driver was on the job, running an errand for the boss, or driving a company vehicle, the employer's business auto policy and any commercial umbrella may respond. Cases involving commercial vehicles are a large part of our truck and commercial vehicle practice precisely because the coverage is usually there.
• The vehicle owner's policy. In Ohio the policy generally follows the car. If the driver borrowed a parent's, spouse's or friend's vehicle, the owner's policy is typically primary and the driver's own policy may provide additional coverage.
• Resident-relative policies. A driver who lives with a parent or spouse may be an insured under that relative's policy as well.
• Your own underinsured motorist coverage. This is the coverage most often overlooked by injured people, and I will come back to it below.
• Other defendants. A bar that overserved the driver, a government entity responsible for a road defect, or a manufacturer of a defective part each brings its own insurance into the case.

I explained in a post last month about the World Harvest Church decision that a verdict is only as good as the coverage that will pay it. That family won nearly $3 million at trial and then watched the Ohio Supreme Court hold that an exclusion in the church's policy left nothing to collect. The lesson runs the other direction too. Finding an extra policy early can turn a $25,000 case into a case that actually pays for the injury.

Your own UM/UIM coverage is part of the search

Ohio does not require any driver to carry uninsured or underinsured motorist coverage. R.C. 3937.18(A) says a policy "may, but is not required to, include" it. If you bought it, though, it is one of the most valuable assets in a serious-injury case.

Underinsured motorist coverage pays when the at-fault driver's liability limit is less than your UIM limit. The statute, in R.C. 3937.18(C), reduces your UIM limit by the amount available from the at-fault driver's policy, so the math is not intuitive. I walked through several examples in an earlier post on the underinsured motorist setoff. The short version: a $100,000 UIM policy against a $25,000 at-fault driver yields up to $75,000 more, not $100,000.

Two things trip people up here. First, your UIM insurer has a right to be notified before you settle with the at-fault driver, and it may have a right to refuse consent so it can pursue the driver itself. Signing the other insurer's release without that notice can forfeit your UIM claim entirely. Second, your umbrella policy may or may not include UM/UIM coverage. Since 2001, insurers have not been required to offer it on umbrellas, and many do not. If you carry an umbrella, pull it out and check. Our uninsured and underinsured motorist page explains how these claims work in more detail.

How a lawyer forces disclosure

An injured person cannot make the other driver's insurer reveal every policy. A lawyer can. Once a lawsuit is filed, Ohio's discovery rules let us demand copies of every insurance agreement that may satisfy a judgment, including umbrellas and employer policies, and require sworn answers to questions about employment, vehicle ownership and household members. Before suit, a well-drafted demand letter puts the carrier on notice that an inadequate limit will not end the matter, and most carriers will disclose excess coverage rather than expose their insured to a judgment beyond the policy.

We also run our own checks: the police report, the vehicle registration, the driver's employer, business filings with the Secretary of State, and the household of every person involved. It is unglamorous work. It is also where many of the largest recoveries in our car crash practice have come from.

What this means for you

If your injuries are serious and the adjuster is offering a policy limit, treat that offer as the beginning of the investigation rather than the end. Ask whether the driver was working. Ask who owns the vehicle. Pull your own declarations page and look for UM/UIM coverage and an umbrella. Do not sign a release until every policy has been identified and your own insurer has been given notice. The coverage that pays for a lifetime of care is usually the policy no one mentioned at the scene.