The Journal of The DuPage County Bar Association

Back Issues > Vol. 24 (2011-12)

Practical Pointers for Uninsured/Underinsured Motorist Cases
By James K. Theisen

Uninsured/Underinsured motorist cases (UM/UIM) involve a claim for personal injuries between an insured and their insurance company.  Typically, the insured is involved in a motor vehicle accident with an uninsured or an underinsured motorist and claims injuries as a result.  Because Illinois has a mandatory insurance law, most cases involve underinsured claims.  The insured seeks compensation from their own carrier under the underinsured provision of their insurance policy. 

Typically, a case will involve a substandard insurance company with policy limits of only $20,000.00 for their insured. If your client/insured has, for example, underinsured motorist coverage of $100,000.00, $80,000.00 is available to recover under the underinsured portion of your client’s insurance policy.  When seeking such coverage, there may be instances when your client/insured asks for an amount of money that his or her own insurance company has decided exceeds the value of the insured’s injuries.  Or your client may be claiming injuries from the accident that his or her insurance company does not believe relate to the accident.  It is on these occasions that litigation between the insured and their insurance company proceeds.

Initiating a Claim. Most uninsured/underinsured insurance policies specify that certain arbitration provisions be followed.  Usually, there is a two year limitation for demanding arbitration or filing suit but this may be tolled pending denial of a claim.  It is essential that in your capacity as the attorney for the insured/claimant that you notify the insurance company of the claim and demand arbitration in a timely manner. 

The case proceeds in a manner similar to a third party claim.  Written discovery is propounded and depositions or sworn statements are taken.  If liability is not an issue, usually only the claimant’s sworn statement is required.  However, your client may be guilty of contributory negligence and the uninsured/underinsured motorist may have to submit to a sworn statement.  Also, as with third party claims, medical records can be subpoenaed and treating doctors can be asked to submit to a sworn statement.  The arbitrators may issue subpoenas for the attendance of witnesses and the production of documents.  Expert witnesses can even be retained if necessary.  Once discovery is completed, the case is set for an arbitration hearing.

Arbitration Process.      UM/UIM cases proceed to an arbitration hearing with three arbitrators. The arbitration procedure and the method of selecting arbitrators are provided for in the policy.  The claimant selects an arbitrator and the defense selects an arbitrator.  Those two arbitrators then select a third, or neutral arbitrator within 45 days. If the two arbitrators fail to select a third within 45 days, the claimant has the right switch the arbitration to the American Arbitration Association as opposed to the arbitration procedure provided for in the policy. Arbitrators are usually attorneys that practice in personal injury litigation.  For instance, defense arbitrators tend to be practicing attorneys who frequently represent insurance companies.  Claimant arbitrators tend to be attorneys representing injured parties.  The neutral arbitrator is supposed to be unbiased and is generally an attorney with a reputation for being fair and impartial.  This is rarely actually the case.  The key in the selection process is the selection of the neutral arbitrator.  If the neutral arbitrator is plaintiff orientated vs. defense orientated, the difference in the award may be substantial.  Once the arbitrators are selected and discovery is completed, then a hearing is scheduled.  The hearing is conducted as if you were at trial in the circuit court. 

The arbitration hearing is usually conducted at the neutral arbitrator’s office in an informal setting.  Venue for the hearing is spelled out in the policy.  Both attorneys provide a brief opening statement and then the claimant’s attorney presents his/her witnesses.  Brief closing arguments are allowed.  After claimant rests, the insurance company attorney presents their case.  The panel deliberates and decides an appropriate award.  Under the insurance policy, the award is valid if entered by a majority of the arbitrators.  A dissent is allowed but will have no effect on the award.  Usually, beforehand, the parties stipulate to allow into admission the claimant’s medical records and bills as well as sworn statement transcripts of witnesses and treating physicians.  Thus, the hearing is efficient and expedited and allows for a quicker resolution.  

A party may appeal to the arbitrators to modify, correct, or clarify the award.  Such an appeal must be made within twenty days after delivery of the award and written notice shall be provided to the opposing party advising that objections must be made within ten days from the notice.[1] A party may also appeal to the court to vacate an award where there was fraud, corruption, partiality or other “undue means” by an arbitrator.  An appeal must be made within ninety days after delivery of the award or, if predicated upon fraud or other undue means, shall be made within ninety days after such grounds are known or should have been known.[2]

Traps For The Unwary. Several nuances in the law can arise which can adversely impact the uninformed lawyer.  One such nuance is that an insurance company is not entitled to set off an award by medical payments if the award exceeds the policy limits of the UM/UIM coverage.[3]  When the total award from the arbitrators is greater than the combined total of uninsured motorist and medical coverage, the insurance company cannot seek a set off.  For example, if the policy’s medpay coverage is $25,000.00 and the uninsured coverage is $100,000.00, even if the insurance company has paid the claimant the $25,000.00 in medpay before the arbitration, if the arbitration award exceeds $125,000.00, the insurance company will not be entitled to a set off of $25,000.00.

Another nuance is that if the insurance company is claiming a set off it must do so during the arbitration hearing or the set off is waived .[4]  Some insurance attorneys believe that disclosing the amount of the set off may be prejudicial to their case.  If an arbitrator were pre-disposed to award the claimant $25,000.00 but then discovers there is a medical pay set off for $24,000.00 that arbitrator may increase the award so that the claimant/insured receives more than $1,000.00.  Oftentimes, the parties will agree prior to the hearing to stipulate that the set off applies without disclosing the amount.  Further, panels will often include general language in their award that said award is subject to an appropriate set off, if any, without the knowledge of the amount. 

What if the attorney for one party is dragging their feet and stalling for time?  What if they are not responding to discovery or presenting their client for a sworn statement?  Unlike a case proceeding in the court system, there are no court calls or case management conferences to control the litigation.  Therefore, an attorney is left with little more recourse than careful prodding.  However, if a delay becomes significant, a party can petition the arbitration panel for an order compelling the other party to answer discovery.  Generally, the neutral arbitrator will draft an order granting the petition and circulate it among the other arbitrators for approval.  This will compel the delaying party to pick up their pace and cooperate.

Finally, the insurance company is responsible for all costs of the arbitration,  including all three of the arbitrator’s fees if the arbitration award is $20,000.00 or less, the state’s mandated minimum insurance coverage.[5]  Generally, per the insurance policy, if the award in greater than $20,000.00, the claimant pays for the claimant arbitrator and half of the neutral arbitrator’s fee.  The insurance company pays for the defense arbitrator and half of the neutral arbitrator’s fee. The costs and attorneys’ fees follow the American rule, each party bearing their own. 

Conclusion. In short, UM/UIM cases proceed in a manner similar to standard litigation.  However, there are some twists in the process for unsuspecting attorneys.  It is very important that you read the policy of insurance.  Some of the policies have time limitations when notice of claims must be made in order to preserve your client’s rights under uninsured/underinsured motorist provisions.  You may be involved in a third party claim and neglect the time limitations for the underinsured claim.  The underinsured claim may be the more substantial than the third party claim.  If this occurs you may have a negligence claim against yourself.

[1] Uniform Arbitration Act, section 20

[2] Uniform Arbitration Act, section 23

[3] Glidden v. Farmers Auto. Ins. Ass'n, 57 Ill.2d 330, 312 N.E.2d 247 (Ill. 1974).

[4] Cole v. Inland National Insurance Co., 133 Ill.App. 2d 745, at 747-748, 273 N.E.2d 65 (Ill.App. 3rd Dist. 1971). 

[5] Nickla v. Industrial Fire & Cas. Ins. Co., 38 Ill.App.3d 927 at 930, 349 N.E.2d 644 (Ill.App. 1st Dist. 1971). 

James K. Theisen, B.S. 1994 Western Illinois University and J.D. 2002 Southern Illinois University School of Law. James is an associate with the firm concentrating in insurance defense litigation, subrogation, and plaintiff’s personal injury. James is licensed to practice before state and federal courts in Illinois and is also licensed to practice in Missouri.

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