We deal with insurance coverage issues every day. Although we are not in the business
of selling insurance, we deal with issues related to insurance and insurance coverage on a
daily basis. As a result of our experience handling insurance claims and claims against
insurance companies, we have become familiar with the different types of insurance
coverage disputes and the questions that our clients frequently ask us about their
Most people have insurance coverage on their automobiles and their homes. The risks
that are covered under these two types of common insurance policies are dramatically
AUTOMOBILE LIABILITY INSURANCE COVERAGE
Automobile liability insurance coverage protects the insured person from claims that are
advanced against the insured person by a third party who may have been injured because
the insured person was careless in the operation of a motor vehicle. Liability insurance
coverage provides a remedy for the injured party and protects the insured person from the
loss of their personal assets to pay the claim. Most states have laws that specify the
minimum amount of automobile liability insurance coverage which must be offered by
insurance carriers. In Wisconsin, that amount is $25,000. In Minnesota, $30,000 is
required. The most expensive liability insurance coverage is the first $25,000.
Increasing coverage limits is far less expensive.
We recommend that our clients purchase liability insurance coverage with policy limits
that are high enough to protect the insured from the loss of their personal assets. A
person who owns a stock portfolio that is worth a million dollars will likely want to buy
and maintain liability insurance policy limits of several million dollars. Conversely, an
individual who has no savings and lives from paycheck to paycheck may be adequately
protected by policy limits of $100,000.
Liability insurance companies have a duty to defend and protect the persons they insure
from the loss of the insured person’s assets. The failure to protect the insured person
from excess claims is bad faith on the part of the insurance carrier and can result in a
judgment being taken against the insurance carrier for compensatory and punitive
For most people, the right amount of liability insurance coverage is the amount that the
insured person feels will adequately protect them from claims caused by their careless
conduct and at the same time provide a remedy for the injured person.
Sometimes it is more cost effective for the insured person to carry lower liability
insurance policy limits on their automobile coverage and homeowner’s policy and to
secure the additional protection they desire by purchasing a separate liability insurance
AUTOMOBILE UNINSURED MOTORIST COVERAGE (UM)
Uninsured motorist coverage (UM) is insurance coverage that is purchased by the insured
person to pay for losses that are incurred by the insured person as a result of the careless
conduct of a driver who has no insurance. Uninsured motorist coverage is required by
law in most jurisdictions. In Wisconsin, insurance companies may not sell uninsured
motorist coverage with policy limits of less than $25,000 per person per occurrence. In
this situation, the uninsured motorist carrier steps into the shoes of the uninsured driver.
The coverage provides a remedy and a solvent source of recovery where one might not
otherwise exist. Uninsured motorist coverage is purchased by the insured person to
protect themselves and their family from damages caused by persons who have no car
insurance. This type of insurance is personal and portable and protects the insured person
regardless of whether or not they are in the insured vehicle. If a person is seriously
injured and permanently disabled as a result of a collision caused by an uninsured
motorist, the value of their claim may exceed $1,000,000. The party bringing a claim for
uninsured motorist benefits has the burden of proof to establish wrongful conduct, the
nature and extent of the resulting harm, and the amount of the monetary damages
sustained. It has been our experience that most insurance agents are not aggressive in
recommending that their clients purchase UM coverage with substantial policy limits.
For the most part this type of insurance coverage is reasonably priced. We encourage our
clients to review their uninsured motorist coverage and consult with us and/or their
insurance agent regarding this subject.
AUTOMOBILE UNDERINSURED MOTORIST COVERAGE
Underinsured motorist coverage operates in a fashion that is very similar to uninsured
motorist coverage. As the name implies, underinsured motorist coverage or UIM
coverage is designed to provide the insured person with a remedy if they are injured by a
careless motorist who does not have enough insurance coverage to pay the insured’s
claim in full. For example, if the wrongdoer had liability insurance coverage with policy
limits of $25,000 (the minimum amount required by Wisconsin law) and caused a
collision which resulted in losses of $150,000, the injured party would have a claim
against their own UIM carrier for the difference between the amount of their losses
($150,0000) and the tortfeasor’s policy limits of $25,000. Most underinsured motorist
policies that are issued in the State of Wisconsin contain reducing clauses. Reducing
clauses provide in pertinent part that the amount of the coverage is reduced by the
tortfeasor’s liability insurance coverage. In the foregoing example, if the insured person
had underinsured motorist coverage of $100,000, pursuant to the reducing clause, the
policy limits would be reduced to $75,000. At one time insureds in Wisconsin could
stack the policy limits on all UIM policies on all vehicles. Under pressure from
insurance industry the legislature passed a law that eliminated stacking.
MEDICAL PAYMENTS COVERAGE
Medical payments coverage is included in most automobile insurance policies. This
insurance is designed to pay medical expenses incurred by any occupant of the vehicle
who is injured as a result of the use of the vehicle. Proof of fault is not required to trigger
medical payments coverage.
COLLISION AND COMPREHENSIVE AUTOMOBILE INSURANCE
Collision insurance coverage is designed to pay the insured the amount that it costs to
repair damages to the insured’s vehicle which are caused by a collision. If the collision is
caused by the wrongful conduct of a third party, the collision insurance carrier usually
seeks to recoup the amount that it paid to its insured from the at fault party. Collision
insurance coverage applies regardless of fault. Most banks who finance the purchase of
vehicles and take a security interest in the vehicle insist that the insured maintain
collision insurance coverage on the vehicle so that the value of the collateral is not
Comprehensive insurance coverage is similar to collision insurance coverage in that it is
designed to pay for damages caused to the insured’s car. Like collision insurance
coverage, comprehensive insurance coverage is property damage insurance.
Comprehensive insurance coverage protects the insured’s property against losses that are
caused by events such as hail storms, floods, trees that fall as a result of wind storms,
theft, vandalism damage caused by wild animals, and related events other that collisions.
The appropriate amount of collision and/or comprehensive insurance coverage is
determined by the value of the vehicle that is insured.
HOMEOWNERS INSURANCE COVERAGE
Homeowners and renters insurance coverage protects the insured person for claims
arising out of the use of and/or loss of the building where they live. Most real estate
loans are secured by a mortgage on the property. Mortgage lenders typically require fire
and comprehensive insurance coverage on the property to preserve the value of the
collateral. Most homeowner’s insurance policies also include liability insurance
coverage and medical payments coverage which operate similar to the manner in which
these types of coverages operate on automobile insurance policies. (see above) It is
common for homeowner’s insurance policies to contain family member exclusions.
Family member exclusions provide in pertinent part that the homeowner’s insurance
carrier does not provide liability insurance coverage when the insured person is a resident
of the insured premises and/or a family member of the insured. In Wisconsin, the courts
have upheld family member exclusions in homeowner’s insurance policies. Family
member exclusions are generally unenforceable in automobile insurance policies that are
issued in the State of Wisconsin.
There are many other types of insurance policies that are commonly placed in force and
about which we are consulted. The list includes general commercial liability insurance
policies, worker’s compensation coverage, professional liability insurance coverage
(malpractice insurance), officers and directors errors and omissions coverage, and
insurance umbrellas. A detailed discussion of all of the different types of insurance
coverage that might be purchased is beyond the scope of this short article. If the reader
has specific questions regarding a certain type of insurance coverage, they should feel
free to contact us and/or their insurance agent.
To contact us with a question about insurance coverage for your losses, click on the link
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