The sad truth is that many irresponsible motorists either (a) do not have any automobile insurance coverage or (b) do not have enough automobile insurance coverage to compensate innocent victims. Victims must often evaluate whether they have Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage, and, if so, in what amount. While the two coverages differ, they serve a similar purpose: providing a safety net for persons injured by a negligent driver. This blog discusses both types of insurance and the concept of “resident of the household” when determining auto coverage.
Purpose of Uninsured Motorist Coverage
Uninsured Motorist coverage is primarily utilized in two situations:
- The at-fault driver has no automobile insurance. We see this most often when a negligent driver lets their policy lapse by failing to pay the premium.
- An accident involves an unidentified hit-and-run driver. In either scenario, the victim can make a claim against the UM coverage on their own auto policy. In essence, the injured victim’s insurance carrier will step into the shoes of the at-fault driver. They will negotiate and compensate their own insured as though they were actually insuring the at-fault driver.
Purpose of Underinsured Motorist Coverage
Underinsured Motorist (UIM) coverage applies when the at-fault driver has coverage, but it is insufficient. By statute, the minimum per-person bodily injury coverage on a North Carolina automobile insurance policy is $50,000. However, many North Carolinians carry higher limits. For example, a car accident victim of a negligent motorist suffers catastrophic, life-changing injuries. If the at-fault driver has only $50,000 of coverage, the injured victim can pursue further compensation from their own UIM coverage.
Typically, the at-fault driver’s carrier will “tender” its payment of $50,000 in exchange for a “Covenant Not to Enforce Judgment.” This document replaces a “Release” or “Settlement Agreement” when UIM coverage is in play. Under North Carolina law, the injured victim’s UIM benefits are no longer reduced by the amount the at-fault carrier already paid. After the tender, the victim can recover the full $100,000 of UIM coverage from their own carrier, in addition to the $50,000 tendered by the at-fault driver’s carrier. The result is that the at-fault party’s carrier pays $50,000, and the victim’s carrier pays the full $100,000, for a total of $150,000 (assuming the victim’s damages support that recovery).
Interpolicy Stacking of UM and UIM Coverage
One of the primary reasons you should consider speaking with an experienced North Carolina personal injury attorney following a serious car accident is that insurance coverage in North Carolina can be complex. Frequently, folks have access to UM or UIM coverage under multiple policies and do not even realize it. The concept of adding UM or UIM coverages from more than one policy is referred to by North Carolina law as “Interpolicy stacking.”
Examples of Interpolicy Stacking
There are several ways in which a person may have access to multiple UM or UIM coverages. For example, a motorcycle owner may not realize that he can combine his UIM coverage under his automobile insurance policy with that under his motorcycle policy, regardless of which vehicle he was driving at the time of a collision. Assuming each policy is equal, this could mean doubling his available UIM coverage.
Far more often, the thing that triggers additional coverage is a victim’s status as a “resident relative.” A recent case in our office provides a great example of how this plays out. A Maginnis Howard client suffered several orthopedic injuries in a bad collision caused by a woman negligently pulling out in front of him. His vehicle was totaled, and he sustained injuries, including a broken sternum and fractured scapula. The at-fault driver had $50,000 of bodily injury coverage. The client’s own auto policy had UIM coverage of $50,000. Because the UIM coverage did not exceed the liability coverage, it initially seemed there was no added protection for the client.
Fortunately, our assessment did not stop at simply looking at the client’s own policy. Our attorneys determined that he was living with his father and grandmother at the time of the collision. Each of these family members had their own auto policies. The father had $100,000 of UIM coverage, and the grandmother’s policy provided $50,000 of UIM coverage. If our client combined these coverages with his own $50,000 of UIM, he would have $200,000 of total UIM coverage.
Our client had access to all these coverages under the other policies because he was a “resident relative.” The standard North Carolina auto policy provides UM and UIM coverage to you and any “family member.” The law defines “family member” as “a person related to you by blood, marriage, or adoption who is a resident of your household.” This includes a ward or foster child.
Resident of the Household Insurance Lawsuits
The phrase “resident of your household” has been the subject of many coverage lawsuits in North Carolina. The state’s law interprets the term very broadly. For instance, in Farm Bureau Mut. Ins. Co., Inc. v. Paschal, the North Carolina Court of Appeals determined that a little girl was a “resident of the household” of her grandfather, even though she did not technically live under the same roof. She lived on a family farm he owned, and he provided all her financial assistance. This was sufficient for her to have coverage under his auto policy. This determination made a huge difference in assisting the child with making a financial recovery for the severe injuries she suffered in a car accident. Importantly, a victim can be considered a resident of multiple households.
Representation for UM and UIM Claims
Our firm’s lead personal injury attorney, T. Shawn Howard, has over a decade of experience handling complex automobile accident claims requiring UM or UIM coverage. He has handled multiple lawsuits before the North Carolina Court of Appeals involving Inter-policy stacking and “resident relative” status. He can assist you in understanding resident of the household insurance and indentifying sources of compensation. Call us at (919) 629-0944 to discuss your potential case or visit our contact page. We represent clients across the Carolinas from our Raleigh, Fayetteville, and Charlotte offices.
