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In defending UM/UIM claim, the biggest risk to the insurer is that the extent of injury will not be revealed to the claim handler for many months or even years following the accident.

In typical automobile litigation, a Summons and Complaint is filed against the “at-fault” driver, demanding an Answer. The file handler will assign attorneys as defense counsel to defend the claim. Defense counsel will file an answer to the summons and complaint on behalf of the insured. Then defense counsel will act aggressively to pursue discovery.

In contrast, UIM claims, have potential for the claim to be given minimal attention after the initial notice of claim, because the claim handler is not require to provide a legal document in response to the notice of claim, such as an Answer, and there is no apparent need to assign defense counsel early. However, many defenses to UM/UIM claims are required to be raised by filing a Court application on behalf of the insurance carrier in a timely fashion after the notice of claim is received. For example, the failure to timely raise insurance coverage issues may be a waiver of significant defenses to coverage available to an insurance carrier.

Similarly, once a demand for arbitration is filed, many courts require timely applications to Court if a stay of arbitration is being sought. The period of time to take appropriate action, from receipt of the demand for arbitration in the mail, until the last date to file a complex legal petition in response may be as little as 20 calendar days. This is not very much time for the papers to find their way to desk of the file handler, for the file handler to review them and assign counsel to analyze them, for defense counsel to read the policy, to investigate, to perform factual and legal research, and to prepare a detailed legal document with exhibits and affidavits, and deliver it to the Courthouse. The failure to timely act may subject the insurance carrier to unwarranted liability, which could have been avoided if appropriate steps had been taken from the beginning.

Many UIM claims Claim handlers may diary the claims file, waiting for the “at-fault” driver’s insurer to settle the underlying claim, which then triggers the UIM coverage. This is particularly true if the claims handler is inexperienced with UIM claims. If an initial letter seeking discovery has been sent to claimant’s counsel by the novice UIM claim handler, all too often there is no follow-up or inadequate follow-up. The claimant’s counsel may send incomplete discovery responses, disguising the claim to present it in a favorable light, omitting any negative information, hoping it will not be subjected to careful scrutiny.

Many claims do not proceed to arbitration until there has been significant activity in the underlying claim or lawsuit against the “at-fault” driver, which can take many months or years to resolve. It is all too easy for the UIM claim handler to assume nothing more needs to be done until the offer of settlement by the “at-fault” driver’s insurer triggers the SUM coverage. The problem with this approach is that a significant period of inactivity by the UIM claim handler may be viewed skeptically later on, when the underlying policy limits are offered in settlement, triggering the UIM coverage. Then, when newly-assigned UIM defense counsel is seeking to compel discovery from the claimant and requests the Court grant a stay of proceedings to allow time to complete discovery, it may be denied.

Some Judges resent the lack of activity: “You had two years to have your discovery,” the Judge may say, “Why should I delay this claim further by giving discovery to you now?” Despite the valid arguments of fundamental fairness to allow discovery, in order for the UIM insurance carrier to verify and test the validity of the claim, some Judges may penalize the UIM insurance carrier for not acting more aggressively to obtain discovery. No defense attorney wants to report back to the UIM claim handler that the Judge has determined that discovery has been waived, and that the claim is proceeding to arbitration without the usual scrutinizing procedures having been utilized, such as Examinations Under Oath, Independent Medical Examinations and obtaining the relevant medical records.

The best way to avoid unpleasant surprises is to assign defense counsel early, particularly if there is a large UIM coverage involved. The expense of assigning defense counsel is comparatively small, as the primary function of defense counsel is simply to make sure discovery has been requested and appropriately followed up if the response from claimant’s counsel is inadequate. Defense counsel may also notice issues that the claim handler may miss, and through timely action, reduce the size of the claim, or take action to resolve the claim by motion, so that the UIM carrier is not required to make payment.

The law firm of Lawrence, Worden, Rainis & Bard, P.C. is AV Preeminent Rated* and is currently listed in Best’s Directory of Recommended Insurance Attorneys and Adjusters. Lawyers at the firm have an average of nearly 20 years of experience handling insurance litigation. To discuss construction accident defense, call 631-694-0033 or contact the firm via email.

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*Martindale-Hubbell is the facilitator of a peer review rating process. Ratings reflect the confidential opinions of members of the Bar and the judiciary.
Martindale-Hubbell ratings fall into two categories – legal ability and general ethical standards.