Uninsured and Underinsured Motorist Insurance Claims – Common Errors

We’ve all been living with uninsured (UM) and underinsured (UIM) motorist claims procedure for years now, but we at Lawyers Mutual continue to see procedural errors lead to legal malpractice claims. Most result not from a failure to know the law, but rather from lax office procedure. We will highlight the most common errors we see and recommend steps you can take to avoid them.

• Failure to formally serve the summons and complaint on the UM carrier within the statute of limitations. As we all know, under Thomas v. Washington, 136 N.C. App. 750 (2000), failing to serve the UM carrier with a copy of the summons and complaint within the three-year statute of limitations bars the UM claim. We continue to see claimants’ attorneys simply mailing a copy of the summons and complaint to the adjuster. This is not proper service under Rule 4 of the Rules of Civil Procedure and is not effective to perfect the UM claim. This error may result from confusing UM claims with UIM claims. In the UIM claim context, one need only give notice of the UIM claim to the UIM carrier. Formal service is not required. UM procedure is more stringent. Formal service is required, as is formal service within the statute of limitations.
• Allowing the claimant to sign a full release rather than a covenant not to enforce judgment. You would be amazed at the number of times an adjuster for a liability insurer sends the claimant’s lawyer a full release for the claimant to sign when the adjuster knows full well the claimant intends to pursue a UIM claim. Sometimes this happens when there are multiple claimants and one or more of them are being fully compensated for their injuries and will sign a full release and one or more are not being fully compensated and intend to pursue UIM claims. The adjuster might send full releases for all the claimants and they are all signed.  This results in the claimants who intended to pursue UIM claims losing their right to do so. This error is undoubtedly caused by a failure to train staff or to implement systems to avoid such an error.
• Failure to give written notice to the UIM carrier of the liability carrier’s tender of limits. As we know, this triggers the UIM carrier’s right to advance an amount equal to the liability coverage  preserving the UIM carrier’s right of subrogation against the tortfeasor. Failing to do this could bar the claimant’s right to pursue the UIM claim. We had a situation recently where the claimant’s attorney faxed the written notice to the UIM carrier only to notice after the covenant not to enforce judgment was signed that the fax notification was not successfully transmitted.

What steps can you take to avoid these common mistakes?

• Train your lawyers and your staff on the critical difference between UIM procedure and UM procedure.  I am convinced some errors we see in UM claims must have to do with the informal notice procedures in UIM claims procedure being translated over to more stringent UM claim handling procedure.
• Implement a rule that every document or release tendered by a liability insurance carrier must be reviewed by a lawyer before it is executed by the client. (This is also an excellent rule to apply to voluntary dismissals without prejudice!)
• Send a letter to the liability carrier before settlement notifying it you intend to pursue a UIM claim and the liability claim can only be resolved with a covenant not to enforce judgment and not a full release. This may lessen the chances the adjuster for the liability insurance carrier will send you a full release when a covenant not to enforce judgment is called for.
• Always notify the UIM carrier of the liability carrier’s tender of limits and send a copy to the liability carrier. Do this before any documents are executed. This tells everyone you intend to pursue a UIM claim and may help you build a case for mutual mistake or estoppel, should you make one of the errors discussed above.

Training, procedures, systems and checklists. These common sense steps will go a long way helping you prevent the most common mistakes we at Lawyers Mutual encounter with UM and UIM claims.