Brian Donald, CPCU, is assistant vice president within the construction risk services division of McGriff, Seibels & Williams, specializing in all construction related risks. Having spent time as an underwriter and now a broker, he brings a unique skill set to his clients.
The auto line of business is the loss leader for most, if not all, insurance carriers. Underwriters are scrutinizing companies’ hiring practices, fleet safety and maintenance programs and, most importantly, loss history. History has a way of repeating itself. An often overlooked coverage detail/limit within an auto policy is uninsured/underinsured motorist coverage.
What is Uninsured/Underinsured Motorist Coverage?
Put simply, uninsured motorist (UM) coverage is first-party coverage that protects an insured for bodily injury and, in some rare instances, property damage as the result of an auto accident with a negligent other party. UM coverage applies when the other party does not have insurance or, in the case of underinsured, does not have enough insurance, to cover the damages subsequently incurred by the insured. UM coverage would pay the insured the anticipated amount the other driver’s insurance would have paid had there been enough or any liability insurance available, such as medical expenses, lost wages and other related damages.
Mr. Project Manager is headed across town between jobsites. On the way, he is sideswiped by a negligent driver, Mr. Texting. Mr. Project Manager is severely injured and will be out of work for at least 6 months, not to mention the significant medical bills he, and now his employer, ABC Contracting, are facing. To compound the bad news, Mr. Texting was driving illegally, without any auto liability coverage. Fortunately, Mr. Project Manager’s employer, ABC Contracting, buys the highest limit of UM limit available: $1,000,000. To be safe, ABC Contracting files a claim with its auto carrier under UM coverage and its workers' compensation carrier, as Mr. Project Manager was acting in the course of work. After months of medical bills and recovery, the claim ultimately negatively affects both the auto policy and workers compensation policy in a significant way. In preparing for its insurance renewal, Ms. Insurance Broker notifies ABC Contracting that it can expect a higher than normal increase on its auto renewal, as the recent UM claim is still open and growing.
What Limit to Buy?
The uninsured/underinsured motorist limit must be determined at policy inception. With as high as $1,000,000 per accident offered from underwriters, most companies opt to purchase the highest limit available in order to protect themselves from a catastrophic loss. The catch is that in the vast majority of instances, if an employee is in a wreck, he/she is driving on company business; therefore, workers' compensation benefits are accessible. By purchasing higher UM limits, you are exposing your company’s loss history to unnecessary claims and payments, because your employee will receive fair and appropriate payment through your workers' compensation benefits.
Sit down with your insurance professional next renewal, and make sure to fully review the uninsured/underinsured motorist coverage being purchased. Not only would purchasing statutory minimums save you premium immediately, it could also protect your company’s loss history from punitive underwriting action.