Settling with the At-fault Driver in UIM Cases: All You Need to Know About Uninsured/Underinsured Insurance Coverage Part 4

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In the fourth blog post in a seven-part series, our Birmingham car accident lawyers explain how to settle an underinsured motor vehicle accident claim with the at-fault driver.

Insurers will include “consent to settle” and “subrogation” clauses in their policies containing UIM (underinsured motorist) coverage that requires the insured's consent before an insured can enter into a settlement agreement with the at-fault driver.

In the case where an insured wants to settle with the at-fault driver, but the insurance company refuses to give its consent, either to protect its subrogation rights or prevent collusion between the settling parties, the Alabama Supreme Court in Lambert v. State Farm has offered the following procedures to facilitate the process:

  • The insured, or the insured’s counsel, should give notice to the UIM insurance carrier of the claim under the policy for UIM benefits as soon as it appears that the insured’s damages may exceed the at-fault driver’s limits of liability coverage.
  • If the at-fault driver’s liability insurance carrier and the insured enter into negotiations that ultimately lead to a proposed compromise or settlement of the insured’s claim against the at-fault driver, and if the settlement would release the at-fault driver from liability, then the insured, before agreeing to the settlement, should immediately notify the UIM insurance carrier of the proposed settlement and the terms of any proposed release.
  • At the time the insured informs the UIM insurance carrier of the at-fault driver’s intent to settle, the insured should also inform the carrier as to whether the insured will seek UIM benefits in addition to the benefits payable under the settlement proposal, so that the carrier can determine whether it will refuse to consent to the settlement, will waive its right of subrogation against the at-fault driver, or will deny any obligation to pay UIM benefits. If the insured gives the UIM insurance carrier notice of the claim for UIM benefits, as may be provided for in the policy, the carrier should immediately begin investigating the claim, should conclude such investigation within a reasonable time, and should notify its insured of the action it proposes with regard to the claim for UIM benefits.
  • The insured should not settle with the at-fault driver without first allowing the UIM insurance carrier a reasonable time within which the investigate the insured’s claim and to notify its insured of its proposed action.
  • If the UIM insurance carrier refuses to consent to a settlement by its insured with the at-fault driver, or if the carrier denies the claim of its insured without a good faith investigation into its merits, or if the carrier does not conduct its investigation in a reasonable time, the carrier would, by any of those actions, waive any right to subrogation against the at-fault driver or the at-fault driver’s insurer.
  • If the UIM insurance carrier wants to protect its subrogation rights, it must, within a reasonable time, and, in any event before the at-fault driver is released by the carrier’s insured, advance to its insured an amount equal to the at-fault driver’s settlement offer.

Whether an insured has given the UIM insurance carrier “reasonable” notice depends on the facts and circumstances of each case. The amount of time is calculated from the date that the insured gives the carrier notice to the date the settlement is accepted. The Alabama Supreme Court ruled in ex parte (on behalf of) Morgan that 10 days from notice to acceptance was not reasonable notice to the carrier.  

If you have questions about your UIM insurance policy, or have been in an accident with an underinsured driver and require legal representation, contact our Birmingham car accident lawyers for a free case evaluation.