With the possibility of several insurance policies coming into play after an accident, it is helpful to understand the state insurance coverage in Arizona and what each policy is trying to do.
There are often three different insurance policies involved in your claim: The auto policy of the person who hit you, your own auto policy, and your health care plan. Each of these companies is obligated to do, and not do, certain things pursuant to the policy. It is helpful to understand the state insurance coverage in Arizona and what each policy is trying to do.
The Liability Policy
If the person who caused the accident has insurance, you are making a claim against their liability coverage. This is the coverage that all insured drivers have to pay a claim if the insured driver is at-fault for an accident. In Arizona, the minimum auto insurance coverage allowed by law is $15,000/$30,000/$10,000. This means that the insurance company will pay no more than $15,000 on any individual claim, and no more than $30,000 total, no matter how many people were injured or how much the claims are worth. The “$10,000" means that the insurance company will pay no more than $10,000 for property damage, including rental, loss of use, diminution of value, equipment, and even damage to street lights, etc., no matter how high the damage or how many vehicles. Now, such insurance coverage is often sufficient if the vehicle damage was moderate and the injuries were not severe. However, if any hospitalization days or surgeries were incurred, the minimum limits will quickly be inadequate. Of course, many liability insurance policies have limits higher than the minimum requirement.
The liability policy carrier for the person who hit you has certain obligations to their own insured, but has limited obligations to you. The Insurance Commission of Arizona requires the company to fairly investigate and evaluate each claim, but there is little guidance on what violates that requirement. The company has no contract with you that requires them to act quickly or kindly. Their goal is to close the file as efficiently and cheaply as possible–get it done now and for as little money as possible. They also have an obligation to protect their insured under the contract. You need to understand that the liability insurance company is in an adversarial relationship with you, even if the adjuster is friendly and a good person. One of the best things you can do to balance the scales between you and the insurance company is to have the same documents they are using. Many people allow the insurance company to obtain their medical records and bills, but then try to negotiate with the insurance company without the same documents. Obtain the same information the company is considering.
Uninsured Motorist Coverage
If the driver who caused the accident is not insured, your own policy will allow you to make a personal injury claim if you have purchased Uninsured Motorist coverage (often referred to as UM coverage). It is mandatory that your insurance company offer you this coverage, but it is optional whether you actually purchase it. However, estimates seem to show that between 30% and 40% of the accidents are caused by drivers with no insurance. Consequently, you really should carry it. You may think you have this coverage because you have been told you have “full coverage.” Full coverage has no meaning in the law or insurance, so look at your policy. If you contact our office, we will gladly review your policy and explain what you have and what it means to you. This will be especially helpful if you have not yet been in an accident and want to have adequate protection if you are.
Procedurally, there are a few differences between making an Uninsured Motorist claim and a liability claim. The time period in which to make a claim is longer–basically three years from the time you know or should have known that the at-fault driver was not insured. Also, the UM provider often has a right under the contract to obtain your medical information directly if you are making a bodily injury claim. Unlike with a liability carrier, you may be obligated to give a statement as part of your duty to cooperate with their investigation. The UM insurance provider also has additional obligations of good faith and fair dealing under the contract. Do not mistake this last obligation as a sign that the UM carrier will treat you more generously–they still basically evaluate and handle the claim as they would a liability claim.
Another difference is that UM coverage is only for the bodily injury claim. It does not cover property damage issues. Your Comprehensive and Collision coverage will be used for that claim.
You may be concerned that your insurance rates will increase if you use your UM coverage. There are laws in Arizona protecting you from rate increases related to making a claim unless the accident was more than 50% your fault. However, keep in mind that if you change insurance companies, the new company can basically consider any claim they want in setting your rates, even ones that were not your fault. This last concern should not dissuade you from making a UM claim if you were injured. The instances in which this would be a factor are rare and you would still likely be money ahead.
Under-Insured Motorist
If the person that caused the accident does not have sufficient insurance to pay the proper value of the claim, then your own under-insured motorist coverage (often referred to as UIM coverage) can be used to fill some or all of the remaining gap. For example, if your bodily injury claim is worth $30,000, but the person who hit you carries a policy of $15,000, your own UIM coverage can fill in the other $15,000 and you can collect the full value of your claim. Like uninsured motorist coverage, the under-insured motorist coverage must be offered to you by your agent or company, but you do not have to buy it. However, in many instances a claim can quickly exceed the insurance available through the at-fault driver, so it is wise to purchase under-insured motorist coverage.
If you have a UIM claim, this is generally pursued as a separate claim after the liability policy has settled.
Collision Coverage
Collision coverage is the insurance you purchase to either repair or replace your damaged vehicle. If the other driver has insurance, his or her policy will be responsible for this repair or replacement. However, there are instances in which you will want to use your collision coverage anyway. First, your own company will often get started on the vehicle faster than the liability carrier. This is dominantly because your company is obligated to take care of the vehicle no matter who caused the accident, so they don’t have to do a complete investigation. Second, if the property damage caused by the at-fault driver is over his policy limit, you will be waiting for his company to offer everyone a reduced percentage. Your own company just takes care of your vehicle and that is it. Third, your own company will then get what they can back from the liable insurance company anyway. As far as your rates are concerned, if the accident was not more than 50% your fault, they cannot legally raise your rates.
There are some down sides on the property damage claim if your coverage is the only coverage–if the other driver is uninsured. First, collision coverage will not pay for a rental unless you have purchased rental coverage as a separate item. Second, your company is not responsible for a loss of use claim. And, third, your company is not responsible for diminished value of your vehicle.
If you were hit by an uninsured driver and you do not carry collision coverage, your only possible remedy is to collect from the driver personally. You have a right to do this, but it is often expensive and fruitless.
Comprehensive Coverage
This coverage is usually sold along with collision coverage but not always. It is a separate coverage with a different purpose. Comprehensive coverage will usually cover your vehicle for issues like theft and fire. Believe it or not, your collision coverage usually will not. If you have collision coverage only, and your car is stolen, you may be out of luck. Again, the only way to know is to review your policy. Call our office if you would like us to do this free of charge. Comprehensive coverage usually does not become involved in an auto accident.
Medical Payment Coverage
Something you may want to consider adding to your automobile policy is Medical Payment coverage (med pay). This coverage will pay automobile accident medical bills up to the med pay policy limit, for anyone covered by the policy at the time of the accident. This coverage can be purchased in various quantities, but the most common amount is $5,000. Obviously, this coverage can be very useful if a person has no health insurance, but it is of value even if you do have a good health insurance plan. Even a health insurance plan will leave gaps in the bills–services out of network, deductibles, co-pays, etc. The med pay coverage can prevent you from having these out-of-pocket expenses. In addition, there are instances when both the health care plan and med pay must pay the charges. Since the medical providers only get paid once, you may be able to keep the difference. The premium payment for med pay is usually very reasonable.
Health Insurance
A surprising number of issues arise out of how to use your health plan in an auto claim. The basic answer is–use it as much as you can to pay the reasonable and necessary medical treatment. Some people believe that, since the liability insurance policy has to pay the bills, their health insurance plan should not have to do so. This is true, but it is the wrong way to approach the matter. If your health care plan pays your medical bills, the liability policy must still consider those charges in their settlement offer or judgment. The money in the settlement that is provided to pay the bills will not, of course go to the medical providers if they have already been paid by the health care plan. So where does the "extra" money go? Basically, it goes either to repay the Arizona health insurance coverage plan or it goes to you, the claimant. In Arizona, most health insurance plans are not allowed to get the money they paid back (called reimbursement or subrogation). So, most of the time, the claimant gets to keep that part of the settlement on top of their pain and suffering award! However, some plans qualify under special government regulations or under federal law and are allowed to get their money back. Even in those instances, the claimant is still usually better off for having used their health care plan as well as making the liability claim for the medical bills. Sorting through whether a health plan can get some or all of their money back is a complicated issue, and the law is still changing. You will likely need to consult with an attorney on these issues.
