Court Decision Regarding Underinsured Motorist Insurance Coverage On Motorcycles

by Steven M. Bialick, Attorney at Law

In Minnesota, if an insured vehicle that causes an accident does not have enough insurance to fully compensate a person injured in the accident, the injured person might be entitled to receive Underinsured Motorist benefits. Underinsured Motorist coverage is required for insurance policies which insure other types of vehicles, such as cars and trucks, but is optional coverage for insurance policies which insure motorcycles.

On May 26, 2009 the Minnesota Court of Appeals filed a decision that can have major consequences for motorcycle owners involved in accidents.

In the case of Johnson v. Cummiskey, a driver whose car had only $30,000 of liability insurance coverage struck a motorcyclist, causing the motorcyclist $134,000 in damages. The motorcyclist collected $30,000 from the car driver’s insurer and $4,000 from the car driver. The motorcyclist then tried to collect the $100,000 Underinsured Motorist insurance policy limit under the insurance policy on his motorcycle, which was issued by Illinois Farmers Insurance Company.

Illinois Farmers was only willing to pay $66,000 based on a provision in their insurance policy which said that the most they would have to pay in Underinsured Motorist benefits is their policy limit ($100,000 in this case) minus the amount collected from any party responsible for the accident ($34,000 in this case).

Based on a Minnesota statutory provision, the motorcyclist argued that he was entitled to receive the full $100,000 policy limit, calculated by taking the amount of his damages ($134,000) minus the amount he collected from those responsible for the accident ($34,000).

The Minnesota Court of Appeals ruled that Illinois Farmers Insurance Company was only responsible for paying $66,000, based on the language of their insurance policy. The Court determined that the statutory provision upon which the motorcyclist relied only applied to insurance policies covering vehicles that are required to have Underinsured Motorist coverage (such as cars and trucks). The Court also ruled that, because Underinsured Motorist coverage is an optional rather than a required coverage for motorcycles, the statute did not apply and the motorcycle insurance policy language determined the maximum amount Illinois Farmers had to pay.

Unfortunately, people who are on a motorcycle at the time of an accident can be severely injured. Vehicles that are responsible for a collision with a motorcycle often do not have enough insurance to pay for all the injuries sustained by those on the motorcycle. Therefore, it is important for motorcycle owners to elect to have Underinsured Motorist coverage under their motorcycle insurance policies. In addition, in view of this recent Court of Appeals decision, it is also important that motorcycle owners carefully review the language of their Underinsured Motorist insurance coverage to make sure enough Underinsured Motorist coverage is available in the event they are seriously injured through the fault of another driver. Simply looking at the Underinsured Motorist policy limit listed in the declaration sheet of the insurance covering the motorcycle might not give a good idea of the maximum amount of Underinsured Motorist benefits that are available in the event of an accident. The following hypothetical example illustrates what could happen in the event of an accident:

Bill had insurance on his motorcycle which included Underinsured Motorist coverage with a policy limit of $100,000. Bill was severely injured when he was rear-ended by a car that had insurance with a $100,000 liability policy limit. It was determined it would take $200,000 to adequately compensate Bill for his injuries. The insurance company for the car paid Bill their $100,000 policy limit and Bill asked his insurance company to pay the $100,000 policy limit under the Underinsured Motorist coverage on his motorcycle to fully compensate him for his injuries. Bill’s motorcycle insurance policy had a provision similar to the one in the Johnson v. Cummiskey case, and his motorcycle insurer said they owed him nothing. Referring to their policy language, Bill’s insurer supported its position as follows: $100,000 Underinsured Motorist policy limit, minus $100,000 paid by the other driver’s insurance equals $0. The Johnson v. Cummiskey decision would support the position of Bill’s insurer.

If Bill, in the above-hypothetical example, had been in his car, rather than on his motorcycle at the time of the accident, Bills’ car insurer would have been required by Minnesota Statutes to pay Bill the $100,000 Underinsured Motorist insurance policy limit, in addition to the $100,000 Bill received from the insurer for the car that struck him.

In view of recent developments, it is strongly recommended that all motorcycle owners:

1. Elect to have Underinsured Motorist insurance coverage on their motorcycles;

2. Make sure the policy limit for that coverage is high enough; and

3. Make sure they read and understand the policy language regarding how the maximum amount payable under that coverage is calculated.

Steven M. Bialick has been in the private practice of law since 1980. He practices in the area of personal injury and accident cases, and his office is located in the Minneapolis suburb of St. Louis Park, Minnesota.

This article is intended to provide general information only, and is not legal advice or a legal opinion on any certain facts or circumstances. Readers are encouraged to consult with an attorney on any specific legal questions or matters.

M.M.M.

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