Motor Vehicle Accidents – What Happens When the Other Driver Is Uninsured or Underinsured

New Jersey law requires all drivers to carry motor vehicle insurance. Despite this, there is a significant number of drivers who are uninsured, or underinsured.

New Jersey requires the following mandatory coverage:

• Liability insurance – covers damages to another if you are found responsible for the accident.
• Personal Injury Protection (PIP) – covers medical expenses for you and others covered by your policy resulting from injuries incurred in the accident regardless of who is at fault.
• Uninsured Motorist Coverage (UM) – protects you when you’re involved in an accident with an uninsured driver (a driver with no insurance).
• Underinsured Motorist Coverage (UIM) – protects you when you’re involved in an accident with an underinsured driver (a driver whose liability policy limit is less than your UM/UIM policy limit).

UM/UIM coverage is typically shown together as one policy limit as they are closely tied together. UM/UIM coverage protects you and your family if you are involved in an accident with another driver who has either no insurance or low bodily injury liability policy limits.

The best way to protect you and your family is to select the maximum amount of UM/UIM coverage offered by your insurance company, which is often a $500,000 combined single limit. It is generally advisable not to select a split limit policy (for example, $250,000 per person / $500,000 per accident), because it limits your recovery to the amount of the per person limit.

How It Works

UM (uninsured motorist coverage) provides you with coverage when the other driver has no insurance, a basic policy without liability coverage, or you are the victim of a hit-and-run accident.

UIM (underinsured motorist coverage) fills the gap when the other driver’s insurance is insufficient to cover your damages. For example, if the other driver has $100,000 in bodily injury liability coverage, and you have $500,000 in UIM coverage, you will be able to obtain the $100,000 from the at-fault driver, and then up to the amount of $400,000 from your own insurance carrier. Your insurance carrier is essentially receiving a credit for the total amount of the at-fault driver’s policy limit.

In either a case involving UM or UIM coverage, a lawsuit is filed against your insurance company, and your insurance company will stand in the shoes of the at-fault driver. If the case goes to trial, your insurance company’s attorneys will be permitted to pretend that they are representing the at-fault driver.

WARNING: Often times, an insurance company will offer to settle your case immediately after an accident. You should not accept any settlement offer from an insurance company without consulting with an attorney. If you settle a case against the at-fault driver without first notifying your insurance company you intend to settle the underlying case, you may be unintentionally forfeiting your right to pursue an underinsured motorist claim against your own insurance company, pursuant to a case called Longworth v. Van Houten.

In certain circumstances, our lawyers may be able to help you rescind a settlement agreement that you made with the at-fault driver’s insurance carrier in order to preserve and protect your UIM claim, but it is important that you contact an attorney as soon as possible to discuss your options. In that regard, N.J.S.A. 17:29B-15(3)(b) provides the following:

An insurance release or waiver of rights by a claimant to compensation for personal injury or wrongful death arising from an accident or disaster, and executed within the 30-day period following the accident or disaster, may be reviewed by the claimant or the claimant’s attorney and may be rescinded within the 10-day period following the execution of the waiver or release by the claimant. Any consideration or thing of value which has passed between the parties prior to rescission of a release or waiver shall be returned. An insurer may withhold payment of the proceeds from settlements made within the 30-day period until the 10-day waiting period has expired.

When renewing your policy, it’s important to review your coverage to make sure it is sufficient to cover a catastrophic accident. Because New Jersey’s motor vehicle insurance system can be complicated, we would be happy to discuss with you whether your insurance policy is sufficiently protecting you and your family.