House Debates Expanding UIM

The Vermont Legislature's House Commerce Committee is considering a bill, H 79 that would change the definition of underinsured motorist coverage.

The American Insurance Association urged the committee to reject the bill. “The Department of Banking, Insurance, Securities, and Health Care Administration studied coverage issues raised by H 79 in a report to the legislature dated Jan. 15, 2004,” said Laura Kersey, AIA assistant vice president, northeast region. “The department concluded that this legislation was likely to result in an increase in automobile insurance premiums in Vermont.”

Under the terms of the current act, a vehicle is underinsured if its personal injury limits of liability are less than the limits of uninsured motorists coverage applicable to any injured party legally entitled to recover damages.

The bill being proposed would change that language to read:

1. The liability insurance limits applicable at the time of the accident are lower than the limits of the underinsured motorist coverage applicable to the insured; or
2. The available liability insurance has been reduced by payments to others injured in the accident to an amount less than the limits of the underinsured motorist coverage applicable to the insured.

Last year, Gov. James Douglas vetoed a similar bill that was intended to address a 2003 Vermont Supreme Court ruling. In that case, Colwell v. Allstate, the court had 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.