What is Uninsured / Underinsured Motorist Insurance Coverage and Why is It Important?

About one in eight drivers on the road do not have auto insurance, according to the Insurance Information Institute. If another driver kills or seriously injures you or a member of your family, there is a very high probability that the person at fault will have little or no liability insurance. Uninsured and underinsured motorist (UM/UIM) coverage protects policyholders who are hurt in a crash involving an uninsured, underinsured or hit-and-run driver.

In Georgia, about 12% of drivers do not have liability insurance. Our neighbors, whose drivers come into Georgia every day are among the worst. In Florida 26.7% are uninsured and in Alabama the figure is 18.4%. Uninsured motorist coverage in connection with automobile collision cases is thus often crucial in obtaining anything close to full compensation for an injured client. This is why many seasoned trial lawyers carry $2 million UM coverage on their family vehicles.

Georgia law at O.C.G.A. §33-7-11(a)(1)(A) requires all automobile insurers operating in Georgia to offer uninsured motorist coverage to policyholders in the same amount as the liability coverage purchased: a minimum of $25,000 per person and $50,000 per accident for bodily injuries, and $25,000 for property damage.

Insureds may, however, elect to purchase uninsured motorist coverage in a lesser amount, to select tiers of coverage for different groups of insureds, or to reject it altogether. For example, an auto dealer was authorized to accept high limits UM/UIM coverage for directors, officers, partners or owners of dealership and family members who qualified as an insured, while rejecting in writing such coverage for any other person who qualified as an insured, such as a customer test driving a vehicle. Jones v. Federated Mut. Ins. Co., 346 Ga.App. 237, 816 S.E.2d 105 (2018).

An insured may purchase excess or umbrella UM/UIM coverages to match their excess or umbrella liablity coverage. Insurers have been known to quietly reduce the UM/UIM coverage without full disclosure. However, such changes of coverage are subject to the statutory provisions on notice of non-renewal. Massey v. Allstate Ins. Co., 341 Ga.App. 462, 800 S.E.2d 629 (2017).

Under a 2009 statutory amendment, insurers are authorized to include “non-duplication of coverage” provisions in uninsured motorist policies for benefits paid under medical payments coverage or the workers’ compensation law. OCGA § 33–7–11 (i) allows UM/UIM coverage to be offset by medical payments and workers compensation benefits. However, this “non-duplication” provisions in a UM policy does not bar recovery under UM/UIM coverage of uncompensated losses, which may include “entire categories of compensation for which he [had] received nothing, such as future medical expenses, future lost earnings, and past and future pain and suffering.”

The definition of who is an insured under uninsured motorist coverage is set by statute. In addition to the policyholder and any other insureds specifically named in the policy, this coverage applies to relatives living in the insured’s household regardless of whether they are in the insured vehicle or not, as well as to anyone else in the insured vehicle, regardless of relationship to the policyholder. O.C.G.A. §33-7-11(b)(1)(B).

It is often possible to “stack” multiple uninsured motorist policies to obtain additional coverages. The rules governing orders of priority with respect to coverage have been largely developed through case law and include three primary tests: the “receipt of premium” test, the “more closely identified with” test, and the “circumstances of the injury” test. See Donovan v. State Farm Mut. Auto. Ins. Co., 329 Ga. App. 609, 610, 765 S.E.2d 755 (2014); Progressive Classic Ins. Co. v. Nationwide Mut. Fire Ins. Co., 294 Ga. App. 787, 670 S.E.2d 497 (2008) (discussing tests for determining uninsured motorist priority). See also Sentinel Ins. Co./Hartford v. USAA Ins. Co., 335 Ga. App. 664, 665, 782 S.E.2d 718, 719 (2016); Dairyland Ins. Co. v. State Farm Auto. Ins. Co., 289 Ga. App. 216, 656 S.E.2d 560 (2008); Canal Ins. Co. v. Merchant, 225 Ga. App. 61, 483 S.E.2d 311 (1997).

Uninsured motorist coverage is applicable in several situations that may arise in connection with automobile collisions. First, where the at-fault driver is known but is truly uninsured, this coverage will apply, up to the limits of coverage, to the insured claimant’s damages. O.C.G.A. §33-7-11(b)(1)(D)(i). A driver is also considered uninsured, under subsections (b)(1)(D)(iii) and (iv), if the insurer has denied coverage or is insolvent. If the at-fault driver and his employer are immune from liability, UM/UIM coverage still applies. FCCI Ins. Co. v. McLendon Enterprises, Inc., 297 Ga. 136, 772 S.E.2d 651 (2015).

Second, where the at-fault driver is insured but the claimant’s damages exceed that driver’s limits of liability coverage, the uninsured motorist coverage will apply to the excess damages. O.C.G.A. §33-7-11(b)(1)(D)(ii).

The at-fault driver is considered to be uninsured to the extent his liability insurance coverage is exhausted or otherwise unavailable. Georgia law allows claimants to settle with an at-fault driver and recover any relevant liability coverage, while maintaining the right to pursue uninsured motorist coverage, under O.C.G.A. §33-24-41.1. This law provides for a limited liability release under which the at-fault driver is relieved of personal liability but may still be sued for the purpose of obtaining further insurance coverage benefits. At least one case has addressed the issue of apportionment of liability in this context, holding that where an at-fault driver’s coverage was exhausted, uninsured motorist coverage was available for that driver’s excess liability, notwithstanding the fact that the plaintiff settled with other potentially at-fault drivers for less than their liability limits. Wade v. Allstate Fire and Cas. Co., 324 Ga. App. 491, 751 S.E.2d 153 (2013).

Third, uninsured motorist coverage may apply in cases where the uninsured driver cannot be located although his identity is known. O.C.G.A. §33-7-11(e). In these cases, the law provides for service by publication, but also requires substantial diligence, as shown by affidavit, on the part of the claimant in order to invoke the coverage.

Finally, uninsured motorist applies to damages caused by an unknown driver, as in a hit-and-run situation or where an unknown driver runs another driver off the road without making contact, although the latter situation requires an eyewitness other than the claimant to corroborate the claim. O.C.G.A. §33-7-11(b)(2). In connection with all of these scenarios, it should be noted that the uninsured motorist statute, O.C.G.A. §33-7-11, does not require a claimant to have been in a car, and the coverage applies, for instance, to pedestrians who are injured by uninsured motorists. American Protection Ins. Co. v. Parker, 150 Ga. App. 732, 258 S.E.2d 540 (1979).

Frequently questions arise in UM/UIM cases as to who qualifies as in “insured” under “resident relative” policy provision. To qualify one must be both a “resident” and a “relative.” While a person may have dual residency, a relative who does not live in the residence is not a resident. A resident of the house or apartment who is a roommate, fiancé, boyfriend or girlfriend is not a relative.

Insurance policies include a variety of exceptions and exclusions that may apply to UM/UIM coverages. There are exclusions of carriages pulled by an animal (upheld) and vehicles drawn by livestock in a “a fair, charitable function, or similar type of event” (vague). Ga. Farm Bureau Mut. Ins. Co., 345 Ga.App. 539, 812 S.E.2d 167 (2018). Where an insurer attempted to exclude UM/UIM coverage under a “livery” exclusion for a passenger who occasionally paid the policyholder who lived in her neighborhood for driving her a few miles into town. After detailed analysis of contract language, the court rejected that exclusion as the policyholder did not fit the definition of a public livery or conveyance. Haulers Ins. Co. v. Davenport, 344 Ga.App. 444, 810 S.E.2d 617 (2018).

The procedures for seeking uninsured motorist benefits vary depending on the facts of the case and the specific basis of the coverage, but, in general, the claim is pursued by filing a lawsuit identical to a regular claim against an at-fault driver. The uninsured motorist carrier is not named as a party to the lawsuit, but must be served with a summons and complaint in the same manner as a named defendant. O.C.G.A. §33-7-11(d). Failure to serve a summons along with the complaint is fatal to the UM/UIM claim. Sharpe v. Great Midwest Ins. Co., 344 Ga.App. 208, 808 S.E.2d 563 (2017).

In cases where the at-fault driver is unknown, the action should be captioned as a case against a “John Doe” defendant. U.S. Fidelity & Guaranty Co. v. Lockhart, 229 Ga. 292, 191 S.E.2d 59 (1972). The case then proceeds in the normal manner, except that the uninsured motorist carrier, at its election, can answer in its own name and assume the status of a party to the case, although it is permitted to withdraw this answer and proceed in the name of the at-fault driver at any time until trial. O.C.G.A. §33-7-11(d); Hossain v. Nelson, 234 Ga. App. 792, 507 S.E.2d 243 (1998) (permitting uninsured motorist carrier filing answer in own name and assuming status as named party to withdraw answer and proceed in name of defendant). Where the uninsured or underinsured status of the at-fault driver is not known at the time the lawsuit is filed, the law allows the later addition of the uninsured motorist carrier to the lawsuit. O.C.G.A. §33-7-11(d).

It is imperative to notify the UM/UIM carrier of a potential claim promptly. Most auto insurance policies require strict compliance with notice requirements at the time of the incident giving rise to the complaint, both with respect to notice to law enforcement of an incident as well as notice to the insurer, and failure to comply with these requirements, even where the insured is not aware of either the existence of coverage or the need to invoke it within the relevant period, may create a coverage defense for the insurer and preclude coverage. Pender v. Doe, 276 Ga. App. 178, 622 S.E.2d 888 (2005) (lack of reporting collision to law enforcement violated policy and precluded coverage); Manzi v. Cotton States Mut. Ins. Co., 243 Ga. App. 277, 531 S.E.2d 164 (2000) (notice to insurer); Flamm v. Doe, 167 Ga. App. 587, 307 S.E.2d 105 (1983) (notice to insurer).

Cases involving alleged lack of notice can be fact-intensive, however, and may turn on the language of the policy as well as the circumstances of the injury. See, e.g., Progressive Mountain Insurance Company. v. Bishop, 338 Ga. App. 115, 790 S.E.2d 91 (2016) (fact question remained whether 11-month delay in notifying uninsured motorist carrier was reasonable); Geico Indemnity Company v. Smith, 338 Ga. App. 455, 788 S.E.2d 150 (2016) (six-month delay unreasonable as a matter of law). The insured must give timely notice to the UM/UIM carrier under terms of the insurance contract, though generally whether an insured complied with a requirement to report an incident “as soon as practicable” or “as soon as possible” after the accident is subject to factual determination by a jury. However, cases have held unexcused delay of notice inadequate as a matter of law in cases with reporting delays of ten months , six months , five months and even as short a time as sixty days. However, in a case of an eight month delay in reporting, there was a jury question whether the delay was reasonable in light of the claimant’s inability to understand the extent of her injuries until a neurologist examined her. Generally, however, the requirement of prompt notice is in most auto insurance policies tied to the date of the accident, not the date that the claimant’s attorney determines that liability insurance is inadequate.

Although uninsured motorist coverage is a form of first-party insurance, it is not subject to O.C.G.A. §33-4-6, the general first-party bad faith statute. McCall v. Allstate Ins. Co., 251 Ga. 869, 310 S.E.2d 513 (1984) (bad faith provision of uninsured motorist statute is exclusive remedy for bad faith, precluding claims under O.C.G.A. §§13-6-11 and 33-4-6).

Instead, the legislature has included a specific subsection of the uninsured motorist statute, O.C.G.A. §33-7-11(j), to govern claims against insurers for failing to act in good faith, and this section has been held to be the exclusive remedy for those claims. McCall v. Allstate Ins. Co., 251 Ga. 869, 310 S.E.2d 513 (1984); Smith v. Stoddard, 294 Ga. App. 679, 669 S.E.2d 712 (2008) (uninsured motorist carrier not subject to O.C.G.A. §13-6-11 claim).

Because the UM/UIM claim is grounded in contract rather than tort, the Offer of Settlement statute, O.C.G.A. § 9-11-68, apparently does not apply, although the courts have not yet addressed that in a reported decision.

O.C.G.A. §33-7-11(j) states that where an insurer fails to pay an insured within 60 days of receiving a demand, and a jury determines that the failure to pay was in bad faith, “the insurer shall be liable to the insured in addition to any recovery under this Code section for not more than 25 percent of the recovery and all reasonable attorney’s fees for the prosecution of the case under this Code section.” The statutory penalty is calculated based on the amount of uninsured motorist coverage, rather than the total liability of the uninsured driver. Jones v. Cotton States Mut. Ins. Co., 185 Ga. App. 66, 363 S.E.2d 303 (1987). Although this provision requires that the claimant first obtain a judgment against the uninsured, underinsured, or unknown driver before pursuing a claim for bad faith, as the insurer is not considered to be legally obligated to pay benefits until a judgment has been rendered, the statutory demand may be made at any time after the claim accrues. Lewis v. Cherokee Ins. Co., 258 Ga. 839, 375 S.E.2d 850 (1989).

Other states also typically provide for uninsured motorist coverage on policies issued within their borders. As contract claims, the laws of the state where the policy was issued apply, and O.C.G.A. §33-7-11 is not applicable to those claims. Amica Mut. Ins. v. Bourgault, 263 Ga. 157, 429 S.E.2d 908 (1993) (holding, on certified question from Eleventh Circuit, that O.C.G.A. §33-7-11 was inapplicable to claim under out-of-state uninsured motorist policy); Smith v. Prudential Property & Cas. Ins. Co., 236 Ga. App. 188, 511 S.E.2d 282 (1999) (New York law governed exclusions and definitions of New York uninsured motorist policy even if the policy was contrary to requirements of Georgia uninsured motorist law.).

In some states, claimants are required to obtain the consent of the uninsured motorist carrier before settling with the at-fault driver, and failure to do so may result in a forfeiture of any claims under the uninsured motorist policy, even if that result would contravene Georgia public policy. Terry v. Mays, 161 Ga. App. 328, 291 S.E.2d 44 (1982). In light of Georgia’s subsequent adoption of O.C.G.A. §33-24-41.1, allowing for the use of a limited release, it is possible that the rationale of Terry is no longer compelling insofar as this release may eliminate any prejudice previously sustained by an uninsured motorist carrier when the insured settles without consent. However, it is prudent to confirm whether there is any possibility of out-of-state uninsured motorist coverage prior to attempting to settle with a liability carrier in order to avoid the possibility of a waiver of coverage.

Ken Shigley is a past chair of the Tort & Insurance Practice Section of the State Bar of Georgia and the Georgia Insurance Law Institute. He worked a decade in a law firm that represented numerous insurance companies in both defense of injury and death cases and in insurance coverage litigation. He is also a past president of the State Bar of Georgia with a long list of professional honors and distinctions.