It is every driver's nightmare: a life-altering injury in an accident caused by an uninsured motorist, and underinsured driver or a hit-and-run driver. Most of us have car insurance that we believe will at least cover our medical and other expenses if this nightmare occurs. Unfortunately, this belief does not reflect the reality for many New York drivers. And by the time they discover the truth, it is too late.
The confusion arises because many drivers are not aware of the difference between liability and supplemental underinsured motorist (SUM) coverage. Liability coverage protects only the people and property injured when you are the one who causes the crash. SUM coverage, on the other hand, specifically protects you if you are hurt by a driver who does not have enough insurance to pay for the damage they cause. It provides valuable protection to you and your family that liability coverage does not.
Every year, thousands of New York drivers wisely choose to purchase liability insurance above the bare legal minimum of $25,000, but they erroneously believe that increasing liability coverage provides a corresponding increase in protection for them and their families. Under New York law, however, SUM coverage does not automatically increase as liability coverage increases. And drivers who are not told about the distinction frequently fail to appreciate that they do not have the coverage that they think they have.
Take the case of Vilma and Victor Rao, who were hit at top speed by an uninsured drunken driver this winter. Like many accident victims in New York, they thought that their insurance would cover the costs of their recovery, lost wages and their growing pile of medical bills. But because they only had the minimum supplemental coverage (also just $25,000), they would have faced bankruptcy if not for the generous contributions of neighbors and friends. It is not that additional insurance was too expensive. Because it is triggered in just a fraction of accidents, such coverage is very affordable, but the Raos simply had no idea what it was, and their insurance company failed to inform them.
All New Yorker drivers are required to purchase auto insurance, and for good reason. Some drivers understand the distinction between SUM and liability coverage, and some agents are certainly diligent in advising their clients when they purchase automobile insurance.
But many drivers do not appreciate the distinction and receive far too little information about what kinds of insurance, and how much, they need. That leaves them at the mercy of insurance companies that may not have their best interests at heart.
A bipartisan bill (S.7787/ A.10784) that passed both the state Senate and Assembly this summer would close these legal gaps and protect consumers. It would require that insurance companies properly explain how SUM insurance works when drivers shop for auto insurance. More importantly, it would set the default level of SUM insurance offered to drivers to the level of liability insurance they plan to purchase.
This legislation is a modest change in the law, and it preserves consumers' rights to choose the coverage that suits their needs. By making the default coverage mirror the insured's liability coverage, the legislation tracks consumer expectations when they purchase car insurance and ensures that they are aware of the role that SUM coverage plays in the event they choose to decline additional coverage.
Not surprisingly, 26 other states already have similar rules in place. New York consumers deserve no less clarity when purchasing their own car insurance.
Steven Todd Brown teaches at the University at Buffalo Law School.
