Insurers Rally Behind Veto Of Vermont UIM Bill

Legislators passed the measure despite opposition from the insurance, industry including the Washington-based American Insurance Association.

Laura Kersey, AIA assistant vice president, noted that the Vermont Department of Banking, Insurance, Securities and Health Care Administration in a Jan. 15 report to the legislature "concluded that this legislation was likely to result in an increase in automobile insurance premiums in Vermont."

After the bill passed, the AIA sent a letter to the governor calling for a veto of the bill. By law, the state legislature will reconvene June 16th for a special session to decide whether to override the governor's veto.

Michael Moran, spokesperson for the AIA, expressed the organization's continued interest in maintaining the current veto. "We obviously opposed the bill initially, and it looked, at first, that it would not pass, but in the end it did. With the potential next week for an override, we are now talking to key state members to sustain the measure if and when the legislature reconvenes to vote next week."

It would take a two-thirds vote of both the House and Senate to overturn the governor's veto. The legislature also has the option of sponsoring a new bill to address Governor Douglas' concerns about the existing measure.

Roger Morris, spokesperson for the Property Casualty Insurers Association of America, commenting on the veto, mentioned that the measure in question had been attached "to an unassociated bill on agriculture. I think the bill was very rushed and pushed through at the last minute. It was not particularly suited to the needs of motorists in Vermont or insurers and would have placed Vermont out on an island by itself in terms of insurance policy compared to the other states."

If it became law, the legislation would reverse the effect of a Vermont Supreme Court decision in the case of Colwell vs. Allstate, which limited insurers' exposure to policyholders' uninsured motorist claims.

The Colwell case involved a plaintiff who was injured in an automobile accident involving several other vehicles and incurred damages in excess of $50,000.

The driver who allegedly caused the accident had a single-limit liability policy with $50,000 in coverage, but that coverage was not enough to pay all claims arising out of the multiple vehicle accident.

The plaintiff settled her claim against the driver for $34,473 and looked to the uninsured motorist coverage in her Allstate policy for further compensation. Allstate denied her claim, asserting that because the driver's liability policy limit was not less than the plaintiff's uninsured motorist-underinsured motorist limit, the driver was not underinsured within the meaning of her policy.

In that case the Court sided with Allstate and held that an at-fault driver's vehicle is not underinsured when the driver's liability limits are equal to or greater than the claimant's UM/UIM limits, even if the UM/UIM claimant receives something less than his UM/UIM limits from the driver due to coverage exhaustion by multiple liability claimants.

The declared aim of the bill that Gov. Douglas vetoed was designed to make it easier for motorists injured in a car accident to collect from their own insurance company when the other driver is at fault but does not have enough liability coverage to pay full damages.