Car Accident Underinsurance Coverage in New York

Joe, a 32 year old Westchester County resident, is driving his 2008 Lexus to meet friends in New York City. On his way south on the F.D.R. drive, he is in a serious car accident with a New York City taxicab with a minimal liability insurance policy. Joe is taken to the hospital with serious back injuries, and ultimately is diagnosed with several herniated discs requiring an operation. Although the taxi company has offered their entire policy, Joe’s injuries are in all likelihood permanent, and even with his own no-fault insurance company paying for the surgery, how can Joe be fully compensated for his injuries in this scenario?

Underinsurance is defined as insurance coverage which protects the driver of a car who is injured by the negligent driver of a car which has minimal insurance coverage, such as a $25,000.00 policy. $25,000.00 is now the minimum required insurance coverage in New York State. Underinsurance coverage allows the insured driver to proceed to recover additional compensation against his or her own insurance company after he or she has collected the policy limits of the negligent driver’s car. The main proviso is that the wrongdoer vehicle must have a smaller amount of insurance coverage than the insured who wishes to collect against his or her own underinsurance coverage.

Underinsurance is a vitally important provision of automobile insurance coverage in New York, and it is shocking how few of our clients actually purchase this coverage when they buy a car. In New York, for only a few hundred dollars a year, coverage of up $500,000 in underinsurance can be purchased to protect against the exact scenario Joe finds himself in. The way it works is this. If the wrongdoer vehicle has a minimal insurance policy-i.e.- $25,000, and your injuries far exceed this amount, the case is settled with the negligent party for their policy limits. With notification of the accident promptly to your own insurance company and their permission to enter this initial settlement, we then proceed to commence a claim against your own insurance company under the underinsurance provision of your policy for the maximum amount of this coverage. This would be reduced by a set off of the amount you already received from the negligent driver’s company. Thus, for example, if there is a settlement of $25,000, and you have $500,000 in underinsurance coverage, there is potentially $475,000.00 in underinsurance available to you to ensure that your injuries are fully compensated.

The moral of the story is as follows: whether purchasing your insurance in New York through a broker, (for some unknown reason, brokers frequently do not mention this coverage to their clients) or directly with the insurance carrier, make sure that you buy the maximum amount of underinsurance available. It could turn out to be one of the best investments you ever make.