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Disclosure Obligations and Motor Vehicle Insurance Policies

Disclosure Obligations and Motor Vehicle Insurance Policies

Automobile insurance policies may have a clause that requires an insured to disclosure information to his or her insurance company that would allow the insurance company to determine if there is a valid defense to a claim against the insured. This disclosure obligation, which could be part of an insurance policy's cooperation and assistance provision, requires the insured to make a truthful disclosure of all information reasonably requested by the insurance company.

It is an insured's contractual obligation to make an honest and complete disclosure of facts, which also includes the circumstances surrounding a claim. An insured's disclosure of facts allows an insurance company to investigate the claim and to decide whether to settle it or to defend against it. A non-disclosure of facts would be a violation of the insured's duty to cooperate if the non-cooperation harms the insurance company's determination of whether a good defense to a claim exists.

Besides making a truthful disclosure of facts, the insured's disclosure has to be full and candid. The facts to be disclosed are material facts, that is, facts that would make a difference in the outcome of a court case. If the insured leaves out facts or lies about them, the insurance company is put into a bad position regarding the claim. It cannot make a proper investigation of the claim. Once the deception is discovered, the insured's breach of his or her disclosure obligation could result in nonpayment of the claim.

An applicant for insurance also has an obligation to disclose certain matters to an insurance company. For instance, if an applicant for automobile liability insurance has an automobile accident after applying for the policy and before the policy was delivered, the applicant owes a duty to the insurance company to disclose that accident.

Underinsured/Uninsured Motorists Stacking Provisions

Underinsured/Uninsured Motorists Stacking Provisions

Underinsured motorist coverage, sometimes abbreviated UIM, and uninsured motorist coverage, sometimes abbreviated UM, are included in motor vehicle insurance policies as a consequence of the fact that many owners and operators of cars and trucks either do not maintain adequate insurance coverage on their vehicles or operate those vehicles without any insurance coverage at all. Underinsured motorist and uninsured motorist provisions in auto insurance policies attempt to provide persons insured under a policy and innocent third parties with some of the insurance protection they would have had if an underinsured or uninsured motorist with whom they are involved in an accident had maintained the appropriate insurance coverage on his or her vehicle.

The process called "stacking" of uninsured or underinsured motorist coverage occurs when a person making a claim under an auto insurance policy attempts to recover more than the amount of coverage specified by the policy for the particular loss that has been suffered. This may happen because the uninsured motorist or underinsured motorist coverage in a policy does not provide a sufficient amount to fully indemnify the claimant for the damages that have been suffered. Stacking claims are often made where a policy covers more than one vehicle or where more than one policy is involved, so that the claimant can argue that separate uninsured motorist or underinsured motorist limits for each such vehicle or policy, rather than a single such limit, should apply, thus allowing a greater recovery than would otherwise be available. Insurers often include provisions in their policies that attempt to prohibit or restrict the use of stacking, and state insurance statutes often contain provisions on the subject of stacking.

The business of insurance, including motor vehicle insurance, has traditionally been regulated by the law of each state rather than by a single unified system of federal law. As a result, the answers to questions related to stacking of uninsured motorist or underinsured motorist coverage may vary widely from one state to another.

Overview of Automotive Products Liability Law

Overview of Automotive Products Liability Law

The everyday operation of millions of cars and trucks on the streets and highways of the United States, and the massive resulting toll in deaths, personal injuries, and property damage caused by motor vehicle accidents, have inevitably created a situation in which the manufacturers and sellers of motor vehicles are implicated as potential defendants in legal actions seeking compensation for the losses arising from such accidents. Products liability law, a subset of the branch of the legal system called tort law, provides the legal standards for determining the potential liability of motor vehicle manufacturers and their dealers in such cases. (The principles of products liability law also apply to non-automotive products, but our discussion here will focus on the law of products liability as it relates to motor vehicles.)

The general legal theories under which a manufacturer or seller of a motor vehicle may be found liable for death, personal injury, or property damage resulting from a vehicular accident are negligence, under which it must be shown that insufficient care was exercised during the design, manufacturing, or assembly process; breach of warranty, which asserts failure to keep a promise about the quality or characteristics of a motor vehicle contained in the contract under which the vehicle was sold; or a more recent concept, strict liability in tort, in which mere proof that a defective product was manufactured, sold, and caused the injury or damage complained of will serve to establish liability without the need for showing either negligence or breach of warranty. Under any of these theories of liability, the most significant aspect of proof is that the vehicle contained some defect in the way it was designed, manufactured, or assembled that caused it not to function as intended, or that the manufacturer or seller failed to warn the purchaser of some risk inherent in its use.

The legal standards applicable in products liability cases are governed by the separate law of each of the states rather than by a single unified body of federal law. (The National Highway Traffic Safety Administration, or NHTSA, has enacted a set of regulations, the Federal Motor Vehicle Safety Standards or FMVSS, with which all new motor vehicles must comply, and these standards may play a role in a products liability action.) The principles of law governing automotive products liability cases, while containing many similarities, will vary from state to state.

Design Defects in Automotive Products Liability Cases

Design Defects in Automotive Products Liability Cases

The basic elements of proof that a plaintiff in a products liability action against the manufacturer or seller of a car or truck has to establish are that the vehicle as sold contained a defect that created an unreasonable risk of death, personal injury, or property damage when the vehicle was used for its intended purpose and that the defect caused an accident or similar incident, such as a vehicle fire, that resulted in the loss for which the plaintiff is seeking to recover damages. Allegations of product defect in automotive products liability cases include inadequacies in vehicle design, errors in the manufacture of vehicle parts and their assembly into a completed car or truck, and failure to warn users of a vehicle about dangers inherent in its use.

Claims of design defect in a motor vehicle can involve allegations about many of the vehicle's parts or assemblies, singly or in combination. A few past examples include allegations that the design of a fuel tank holding strap and its connection to the fuel tank permitted the fuel tank to be pierced in a rear-end collision, that a rear seat belt design created an unreasonable risk of abdominal injury in an accident, and that the location of the fuel tank on a pickup truck failed to provide sufficient protection against the risk of fire in a side collision. A subset of the overall area of design defect involves crashworthiness claims, in which it is alleged that because manufacturers know that cars and trucks will be involved in collisions in the ordinary course of their operation, failure to design a vehicle so as to provide a reasonable degree of protection against injury in the event of an accident is itself a design defect that creates liability on the part of the manufacturer. Some courts require the plaintiff in a design defect case to introduce evidence of a feasible alternative design that could have been employed in the place of the allegedly defective design element in the vehicle, while other courts allow a jury to consider design defect claims without the necessity for establishing the existence of such an alternative design.

Products liability law in the United States, including automotive products liability law, has evolved for over half a century out of developments in the separate legal systems of each of the states, rather than as a single unified body of federal law. (The National Highway Traffic Safety Administration, NHTSA for short, has enacted a body of Federal Motor Vehicle Safety Standards, or FMVSS, with which every new motor vehicle must comply, and these standards may play some part in an automotive products liability case.) While developments in products liability law in the different states contain many similarities, the legal principles governing claims of design defect in automotive products liability cases will vary from state to state.

Setoffs and Uninsured Motorist Insurance Policies

Setoffs and Uninsured Motorist Insurance Policies

When an insured files a lawsuit against an insurance company, the insurance company can file a counter claim against the insured to reduce the amount of the insured's claim by an amount that the insurance company claims that the insured owes to it. The amount owed can be unpaid premiums or funds received by the insured from other sources that would exceed the amount of the insured's loss. This is called a setoff, an offset provision, or a benefit-set off provision. In the case of uninsured motorist coverage, setoffs exist for a number of benefits that an insured could obtain due to an automobile accident.

Some state statutes allow uninsured motorist insurance companies to setoff amounts that an insured received from workers compensation, Social Security, and settlements with a liability insurance company. Therefore, if an insured were injured in a car accident while driving in the course of his or her employment, the insurance company could offset the uninsured motorist benefits in the full amount of the insured's workers compensation judgment.

Some states prohibit the reduction of uninsured motorist benefits by the amount of an insured's personal injuries award. Those states contend that the amount paid by a third-party's insurance company to the insured for personal injuries does not affect the amount that the insured should receive from his or her insurance company based on the loss caused by an uninsured person.

Setoffs not only avoid double recovery by insureds, they can reduce insurance costs. Setoffs required by an insurance policy must be considered by an arbitrator.