When many people shop for insurance they begin with a query that seems reasonable: How much will my premiums be?
Flashback twenty-six years or so ago, I worked at GEICO Insurance in Woodbury, NY. I would field phone calls from people “shopping” for insurance quotes for their automobiles and more often than not their questions would go something like this:
I’d like to get a quote on car insurance on my Honda Accord please. I have StateFarm now and pay $130 per month. Can GEICO beat that rate?
After collecting some further information such as driving history, accidents in the last 10 years, points on license, etc. and plugging the data into the computer, a rate would be spit out. If the monthly rate offered by GEICO was cheaper than their rate with StateFarm, the caller would switch over to GEICO immediately and if it was higher they would decline or just hang-up the phone.
At the time I thought this made sense, but having practiced law for more than fifteen (15) years and having dealt with insurance companies, coverage issues (deny/disclaim) and coverage options, I now realize how foolish this was. And I think it is simply because most people don’t understand what insurance coverage is available, how inexpensive additional coverage may be and how important it really is. While the different types of insurance available are well beyond the reach of this post, let’s start with Automobile Supplementary Underinsured Motorist coverage in New York, or SUM for short. SUM coverage is coupled with Uninsured Motorist (UM) coverage. These coverages are relatively cheap, but often not discussed or known of, so let’s explore.
How Does SUM Coverage in NY Work?
Jack is driving his Honda Accord and Jill is driving her Buick Regal up a hill when Jack reaches over his center console to fetch a bottle of water. Jack is distracted, takes his foot off the gas and rolls backward down the hill, striking Jill’s Buick. Jill is rushed to the hospital, has sustained serious injuries and loses a significant amount of time from work where she holds a job with a Fintech company earning $400,000.00 per year. After being released from the hospital, Jill goes to a lawyer to see about bringing a personal injury case. After all, the accident was not her fault and she has endured pain and suffering, also losing significant income not being able to work. Now the bad news: Jack carried only minimum insurance as required in New York State, $25,000/$50,000 of bodily injury liability (BI) coverage. This means that Jack’s insurance will only pay $25,000 to Jill for her injuries and up to a maximum of $50,000 in total to everyone in Jill’s car who was hurt as a result of Jack’s negligence. Doesn’t seem very fair to Jill, does it? It’s not fair, but let’s suppose that since Jill is smart and earns a substantial income; talked to her insurance agent about available insurance coverage and did not just “shop lowest price,” she had SUM coverage of $300,000/$300,000. This bodes well for Jill.
Jack’s insurance company concedes liability and given the severe nature of Jill’s injuries, coupled with her lost income decides to tender their $25,000 policy limit to Jill. Jill’s lawyer asks her own insurance company for permission to accept said tender without prejudicing her rights to look to her own SUM coverage for amounts over that $25,000. After receiving that permission, Jack’s insurance company mails Jill’s lawyer a check for $25,000 and Jill’s lawyer will file for Arbitration through AAA with an additional $275,000 available to compensate Jill for her losses ($300,000 – $25,000). Jill paid a relatively small amount of money to her own insurance company to protect herself in case a guy like Jack carried only minimum insurance coverage and caused an accident. If the lawyer for Jill’s insurance company and Jill’s lawyer cannot agree on an amount of money to compensate Jill ($275,000 in coverage available) then the matter will be heard by an Arbitrator whose decision is final, absent bias or something else extraordinary.
And that’s how SUM coverage works! It’s relatively cheap and well worth the additional premium payment.