How Insurance Coverages Interact

How Liability Insurance, Uninsured/Underinsured Motorist Insurance and MedPay Interact

Being in an accident can be inconvenient on many different levels. You may suffer injuries, lose your vehicle for a significant amount of time, miss time from work and more. Whatever the reason may be, we can all agree that in some way or another, being involved in an accident will likely cause some sort of disruption to your life.

At least you can rest assured knowing that when you are not at fault for the accident, someone else’s insurance company will be covering your damages…right? Usually, the answer is yes; however, this may not always be the case. For instance, an at-fault driver may not actually carry auto insurance, or your damages may be greater than the at-fault driver’s insurance policy limits.

When one of these situations occurs, all may not be lost. This article will provide you with information on what you can do when:

  1. You are in an accident in which the at-fault driver does not have car insurance; OR
  2. You are in an accident in which the at-fault driver does have insurance but your damages exceed their liability policy limit

Liability Insurance and Uninsured Motorist (UM) Coverage

Uninsured motorist coverage applies when an at-fault driver in an accident does not have car insurance. This type of coverage is required in North Carolina; therefore, all car insurance plans will include this type of coverage. Uninsured motorist coverage will typically match your liability insurance policy limits. For more information, please read Uninsured Motorist Coverage.

Uninsured motorist coverage is typically triggered when you are in an accident with an at-fault driver who does not have insurance. If you are the at-fault driver, your uninsured insurance coverage will not be available. Your uninsured motorist coverage will generally cover up to your personal liability limits. In other words, if you have the minimum required policy limit in North Carolina of $30,000 per individual (for more information about liability limits, please read Liability Coverage), then your uninsured motorist coverage will cover up to that amount.

For example, let’s assume that you are in an accident with an at-fault driver who does not have car insurance. Your medical bills are $40,000. You have the minimum required personal liability limit of $30,000, which your uninsured motorist coverage matches. Here, because you were not at-fault, you should be able to open a claim under your uninsured motorist coverage. Unfortunately, your entire medical expenses of $40,000 will not be covered because your policy limits are limited to only $30,000.

With this being said, all may not be lost, as “stacking” of uninsured policies may be an available option. The following section will examine a situation in which more than one uninsured motorist policy may be at your disposal for coverage.

Stacking of Uninsured Motorist (UM) Coverage

When injured by an at-fault driver who does not have insurance coverage, you may be able to combine several uninsured motorist policies to cover your damages. Combining two or more coverages is known as “stacking.” Generally, a person may have multiple coverages in one of two ways: intra-policy or inter-policy.

Intra-policy coverage occurs when you have more than one vehicle covered under the same policy. When this occurs, you cannot “stack” the policies in order to get more coverage. For example, let’s assume that you were in an accident with an uninsured at-fault driver. You open a claim with your own insurance company’s uninsured motorist coverage. You have two vehicles under that same policy. In this instance, you would only be able to open a claim under one of the vehicles, as it is considered intra-policy (two or more vehicles under the same policy).

You may be able to stack uninsured motorist claims, however, if it is considered inter-policy “stacking.” Coverage is considered inter-policy when you fit into the definition of an “insured” on multiple policies. This generally occurs when you are a passenger in another person’s vehicle. For instance, let’s assume that you are riding in a friend’s vehicle and are involved in an accident. The other driver is determined to be at-fault, but does not have car insurance. Your friend’s vehicle has $30,000 of uninsured motorist coverage and your own personal vehicle has $30,000 of uninsured motorist coverage. Due to the policies being separate (inter-policy), you will have $60,000 of total coverage by “stacking” the available uninsured policy coverage.

Important Note: When stacking inter-policy uninsured motorist coverage, the coverage for vehicle that was involved in the accident must typically be exhausted before any other uninsured motorist coverage will be liable to pay. This is assuming, of course, that the vehicle that was in the accident has insurance coverage. To clarify, referring back to our example, your friend’s uninsured motorist insurance coverage of $30,000 would likely need to be exhausted before you could use your own uninsured motorist coverage.

Liability Insurance and Underinsured Motorist (UIM) Coverage

Underinsured motorist coverage is typically available when your personal liability insurance policy limit is greater than that of the at-fault driver’s. In other words, if you are injured in an accident and your treatment costs exceed the at-fault driver’s liability limits, then you may be able to use your underinsured motorist coverage. Unlike uninsured motorist coverage, underinsured coverage is not required in North Carolina; therefore, you will need to determine whether it is included within your car insurance policy. The following example provides some guidance as to how typical underinsured motorist coverage works. For a general overview on this type of coverage, please read Underinsured Motorist Coverage.

Let’s assume that you are in an accident with an at-fault driver who has the minimum liability limit amount ($30,000/$60,000). However, you have an underinsured policy amount of $50,000/$100,000. Your personal injury damages are $40,000. You settle with the at-fault insurance company for the policy limit amount: $30,000. Under these facts, you will likely be able to open a claim with your underinsured motorist coverage as the policy limits of the at-fault driver have been exhausted.

Important Note: Remember, you must reach a settlement or judgment before your underinsured insurance provider is obligated to pay out on the policy. There are certain rules and obligations imposed on you and your claim when seeking underinsured insurance coverage. This can be an extremely complicated process.

Stacking of Underinsured Motorist Coverage

When applicable, underinsured motorist coverage may also be “stacked.” Similar to that of uninsured motorist coverage, underinsured coverage only permits “stacking” inter-policy. In other words, you cannot stack intra-policy (i.e., when two or more vehicles are covered under the same policy). Therefore, so long as you are considered an “insured” under separate policies, then you may be able to stack different underinsured motorist policy coverages.

For example, let’s assume that you are a passenger in a vehicle and are injured. The other vehicle was deemed at-fault. You settle your claim with the at-fault insurance company for $30,000, as they have the minimum required policy limit. The passenger’s vehicle you were riding in has $50,000 of underinsured motorist coverage, and the vehicle you own and are insured under also has $50,000 of underinsured motorist coverage. These two underinsured policies can be “stacked” because they are available to you under separate policies (inter-policy). Thus, you would have $100,000 of underinsured motorist coverage available to you.

Important Note: Although your underinsured coverage will be $100,000, it does not necessarily mean that the underinsured insurance company will have to pay out $100,000, as they will still receive a credit for the amount paid by the exhausted liability insurance.

Credits and “Stacking” Rules for Underinsured Motorist Coverage

When using underinsured motorist coverage, you may be entitled to the excess amount of coverage after liability coverage of the at-fault driver has been exhausted. In other words, if you have underinsured motorist coverage in the amount of $50,000 and are in an accident with a vehicle that carries only the minimum ($30,000), then your insurance coverage is entitled to a credit for the $30,000 paid by the at-fault driver’s insurance. Therefore, your underinsurance coverage only has to pay up to an additional $20,000 ($50,000 minus $30,000).

When stacking underinsured motorist policy coverages, the rules as to who gets to take the deduction for the paid liability policy limits can be tricky. The general rule is that the underinsured motorist coverage of the policy covering the vehicle involved in the wreck deducts the full amount paid by the liability policy, as that underinsured policy is considered “primary” coverage. If your damages exceed the underinsured policy limits of the “primary” insurer, then the other underinsured motorist coverage will have to pay. The underinsured motorist policies that are not considered “primary” pay jointly based upon their pro-rated share in accordance with their underinsured limits.

Lastly, if for some reason no underinsured policy is considered “primary,” then all policies will share in the deduction of the exhausted liability policy. Also, all policies will share in payment of your damages, and this too will be based upon their pro rated share in accordance with their limits. Thus, it is possible to have several policies share in both the credit and payments.

MedPay Offsets with Uninsured and Underinsured Motorist Coverage

One last important thing to mention about both uninsured and underinsured motorist coverage is that they may be able to take a credit for any MedPay spent on your behalf. MedPay, also known as Medical Payments coverage, reimburses the insured for the reasonable and necessary medical and funeral expenses related to an automobile accident, up to the policy limit. For more information on MedPay, please read MedPay Coverage.

Due to the nature of uninsured and underinsured motorist coverage, the policies may be able to take credits for paid MedPay, so long as “set-off” provisions are included in the policy language. Generally, a set-off provision simply states that in the event that either uninsured or underinsured motorist coverage become liable, the insurance provider may take a credit for all “Medical Payments” paid from the policy. It is important to note that case law in North Carolina has established that insurance policies that do not include some sort of “set-off” language will not be able to take a credit for paid MedPay. Therefore, it is important to thoroughly review your policy language when opening an underinsured motorist claim.

Let’s look at the following example for a better understanding as to how this credit works. Assume that you are involved in an accident and have to use your underinsured motorist coverage, as the at-fault driver’s minimum policy limits of $30,000 have been exhausted. Your underinsured policy limits are $50,000 per individual. Generally, your underinsured insurance coverage would take a credit for the $30,000 paid by the exhausted at-fault driver’s liability insurance; therefore, the underinsured insurance policy will only have to pay up to $20,000.

However, let’s now say that you have a $5,000 MedPay policy that you exhausted soon after the accident occurred. Assuming the “set-off” provisions are included in your policy language, your underinsured motorist coverage may additionally take a $5,000 credit for the paid MedPay. Therefore, your underinsured motorist coverage is now only liable for up to $15,000 ($50,000 minus $30,000 [exhausted liability] minus $5,000 [MedPay] = $15,000).

Due to the complexity surrounding this area of law, I would recommend speaking with a personal injury attorney in your jurisdiction if you have been injured in an accident. Please feel free to use our lawyer locator service.


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