Underinsured Motorist Coverage Provides a Floating Layer of Coverage

Posted Thursday, January 25, 2018 by Ed Harper

In the State of Washington, underinsured motorist (UIM) insurance provides coverage above any liability coverage for an at-fault party. This can be beneficial to provide more available funds to an injred person and may be the only avenue of insurance to collect for a personal injury.

RCW 48.22.030 (1) requires insurers to provide a layer of coverage which “floats” above any liability insurance available to the tortfeasors. (Elovich v. Nationwide Insurance Company, 104 Wn. 2d 543 [1985]). The UIM coverage provides a secondary layer of protection over and above the recovery from other sources.

The Supreme Court of Washington in interpreting RCW 48.22.030(1) stated “UIM vehicle means a motor vehicle…with no bodily injury…liability…insurance policy which applies at the time of the accident, or with respect to which the some of the limits of liability under all bodily injury…insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.” Elovich, supra. Thus, when an at-fault party has no insurance or limited insurance, you can ask for UIM benefits.

In Elovich, which involved a two car accident, on July 12, 1981, 6 persons were riding in the Elovich vehicle. The at-fault vehicle collided with the Elovich vehicle. This at-fault driver was un-insured driver with negligible financial assets. Two of the six persons died, two suffered serious injuries, and two were less seriously injured. The parties settled with several defendants, including the governmental entity responsible for road design. The plaintiffs then asserted they were entitled to UIM coverage up to the policy limits or full compensation for their injuries. The plaintiffs asserted the settlement figure should be subtracted from the total damages, and Nationwide must pay the difference up to the policy limit.

The Elovich court was concerned with resolving an ambiguity in the statute: whether the UIM coverage is a “decreasing” layer of coverage that guarantees a minimum payment, or a “floating” layer of coverage that applies up to the total of damages suffered.” Elovich, supra.

The court determined RCW 48.22 030 shifted the emphasis from minimum recovery defined by policy limits to the total damages the party had suffered. This amendment indicates that the floating layer theory applies. Here, the court understood the legislative’s purpose was to focus on full compensation for the insured and that when an insurance policy is less than the damages which the covered person legally may recover, the UIM coverage must step in.

This does not mean the insured person is allowed full compensation, but the UIM carrier is responsible for damages up to their liability limits. Another way to look at UIM claims is to consider insurance coverages as building blocks. In a no-fault accident, the injured person has as a first layer of coverage, the personal injury protection (PIP) coverage. The second layer is the liability coverage for the at-fault vehicle or driver. And the third layer is UIM coverage, which stacks on top of the PIP and liability coverages.

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