Multiple Pedestrians Injured in East Village Accident Demonstrates Merit of Propsed Legislation Regarding Disclosure of Underinsurance Coverage

Just two days after eight people in New York City’s East Village on Wednesday (June 19, 2013) morning were injured when a motor vehicle allegedly being driven by a drunk driver mounted a sidewalk and struck them, the New York State Senate failed to pass a bill that would have required disclosure to purchaser’s of insurance of the availability of coverage that could have provided additional insurance to the victims. Called Supplementary Uninsured Motorist’s (“SUM”) coverage, this coverage can potentially provide compensation where the wrongdoer either has no insurance or has less insurance than the victim. In the recent motor vehicle accident it appears that the vehicle had insurance, but it is unclear how much. Whatever the amount, it will have to be shared by all of the injured, which may not leave enough money to adequately compensate all (or any) of them for their injuries, including their pain and suffering.

The New York State Assembly had passed the bill. Last year a similar bill that would have required insurance policies to provide equal amounts of coverage for liability and SUM coverage passed both the Assembly and Senate but was vetoed by Governor Andrew M. Cuomo because he believed that the law would add to the financial burden of consumers purchasing insurance by requiring them to affirmatively opt out of the equal SUM coverage. Under current law the consumer has to be knowledgeable to ask for the coverage.

The reasoning behind the bill was that most consumers are not knowleadgeable about the existence or purpose of SUM coverage, which is to provide insurance coverage for policyholders and their families who are victims of negligence. People are most familiar with the liability coverage portion of their insurance coverage, which provides compensation to victims of the policyholder’s negligence (thereby protecting the policyholder’s assets). The result is that people protect victims of their own negligence better than they protects themselves and families from somebody else’s negligence.

When friends tell me that they have “full” coverage, they do not usually realize that they do not have much SUM coverage. “Full” coverage generally means that the person has collision and comprehensive coverage; it does not mean that they have the best and broadest coverage

The way SUM coverage works is that if a policyholder’s liability insurance coverage limits exceed that of the wrongdoer, and the SUM coverage exceeds $25,000.00, there is SUM coverage to the extent that SUM coverage exceeds $25,000.00. If the wrongdoer has no insurance, then the full amount of the SUM coverage is available.

Section 3420 of the Insurance Law of New York requires that every motor vehicle insurance policy contain uninsured motorists (“SUM”) coverage in the sum of $25,000.00 for each person injured in one accident and an aggregate of $50,000.00 for all of those injured in accident subject to the individual limit. Policyholders have the option of purchasing an additional amount of SUM coverage up to the amount of their liability insurance coverage limit.

One huge benefit is that SUM coverage will apply even if the insured vehicle is not at all involved in the accident. For example, in the Manhattan East Village motor vehicle accident this week, if any of the injured pedestrians (and perhaps even the passenger) had insurance on a vehicle, or a family member with whom they reside did, they might have coverage in addition to what all those injured have to share of the wrongdoer’s insurance. It would not matter that their insured vehicle had nothing to do with the accident.

In vetoing the bill last year, Governor Cuomo said “[t]he Department of Financial Services will be exploring ways to increase consumer education on the benefits of SUM coverage so that consumers can make a more informed decision about whether or not to purchase it …” Apparently it has not successfully done so yet.

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