Minimum Insurance Requirements

August 5, 2014

A common situation that we see happening due to reduced minimum insurance requirements is that people’s assets are at risk for excess judgments. If you are involved in a car accident and only have minimum insurance, such as $25,000.00 or $50,000.00 in coverage, and you are at fault for the accident, the other party may have medical bills and damages beyond this amount. If that is the case, your insurance company may be able to “pay and walk,” which means that they can pay the policy limits to the other driver and try to walk away from having an obligation to defend you.

You could be left having to defend yourself in court and pay any judgment that results. Typically, the other driver will have their own under-insured motorist (UIM) coverage, which could kick-in to help pay the injured party. However, the new law in Wisconsin provides that any policy that you have will reduce the under-insured motorist policy. These are called “reducing clauses.” For instance, if you have a $50,000.00 liability policy and hit someone and are at fault and the other driver only has a $50,000.00 under-insured motorist policy, the injured driver really has no UIM insurance available.

This is because your $50,000.00 limit has to be credited to the amount of UIM that the other driver has available. Thus, in that example, you have $50,000.00 of coverage and the injured party has $50,000.00 of UIM coverage, so we take the $50,000.00 UIM coverage, minus the $50,000.00 of liability coverage you have, leaving zero UIM coverage for the injured party. If the injured party had $100,000.00 UIM coverage and you had $50,000.00 of coverage, we would deduct that and the injured party would still be able to collect $50,000.00 from you and $50,000.00 from their insurance company under the UIM policy.

If you are involved in an accident and believe that you may not have sufficient coverage, you should contact an attorney. Your insurance company has several duties to you, including the duty to settle within the policy limits, duty to inform you of offers, duty to investigate, the duty to defend and other duties that, if breached, could lead to a claim for bad faith. Contact the Milwaukee car accident lawyers and bad faith lawyers at Welcenbach Law Offices if you have any questions about your auto accident or car crash insurance case.