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Asking permission is key to collecting underinsured motorist benefits

December 4, 2013 by Steven M. Gursten

Craig v. Larson provides cautionary tale for all attorneys about settling a car accident claim without  first getting consent from UIM insurer

Patricia Ann Craig’s story should be a cautionary tale for any personal injury attorney trying to collect underinsured motorist (UIM) benefits.  It highlights some of the additional challenges that underinsured motorist claims pose in the minority of states like  Michigan, where settling a car accident case without receiving written permission first will prove fatal to making a successful underinsured motorist claim and settling for policy limits with the underlying torfeasor.

The lesson: Do exactly what your No Fault UIM insurer tells you to do … Exactly (no matter how unfair your own client’s insurance company is acting) … or you risk your own legal malpractice case!

Ms. Craig might have been to collect as much as $300,000 in UIM benefits for her pain and suffering after she was seriously injured in a car crash. But instead, she’s stuck with the $80,000 she recovered from the at-fault driver who caused the motor vehicle accident.

What did Ms. Craig’s lawyer do wrong?

Because Ms. Craig didn’t follow the rules in her UIM policy, said a unanimous Michigan Court of Appeals panel in Craig v. Larson, and thus, she is excluded from collecting benefits under her $300,000 UIM policy with Frankenmuth Insurance Company.

Ms. Craig’s UIM policy provided that Frankenmuth would:

“[N]ot provide Underinsured Motorist Coverage for bodily injury sustained by any person … If that person or legal representative settles the bodily injury claim without our consent.”

Where Ms. Craig’s lawyer went wrong, according to the court, was when:

She “entered into a mutual acceptance of the case evaluation award” [of $80,000] with the at-fault driver and his liability insurer “without first obtaining the consent” of Frankenmuth.

Despite the attorney’s insistence to the contrary, the appellate judges concluded that Ms. Craig’s  “mutual acceptance” of the case evaluation award was “a settlement” of her “bodily injury claim” for purposes of the UIM policy’s exclusion provision.

My own opinion: Michigan’s UIM laws are terribly unfair.  The majority of states in the country today do not nearly impose these kind of form over substance hurdles to collecting UIM, and this leads to horrible abuse. Some insurance companies, most notably Farm Bureau Insurance Company, seem to exercise almost no good faith in letting their own insureds – who have paid good money for these policies – ever collect from the at-fault driver’s auto insurance policy. This occurs even when the other insurance company is practically begging to settle the case and offer its policy limits.  With our courts and particularly our Supreme Court as it currently is, do not expect this law to change anytime soon.

Tread very carefully when proceeding with UIM-underinsured cases if you are unfamiliar with this area of law, for the potential to make a mistake is very high.

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2 Replies to “Asking permission is key to collecting underinsured motorist benefits”

  1. Steve: Great post; terrific advice for both clients and attorneys. It is sad that an insurance company that takes your premiums for years would treat customers this way, but this is the lay of the land in Michigan. Folks: Take it from someone who has been in and around the law in Michigan for almost 40 years. When the time comes to retain the services of an attorney for your Michigan automobile accident, Steve Gursten is an excellent choice His knowledge of the Michigan No-Fault Automobile law and its nuances is second to none. My heart breaks for Ms. Craig. Steve: Keep up the great work in educating Michigan consumers. Regards, Mark

    1. Thanks Mark, appreciate the kind words. With the doctrine of reasonable expectations of innocent customers now abolished by the (Republican) Michigan Supreme Court, it will be both sad and interesting to see how far insurance companies can now push the envelope before having to pay benefits that they were contractually obligated by law to pay. Very sad for the people of Michigan.

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