Automobile insurance coverage limits, permissible policy provisions, and proof of financial responsibility

1. Before January 1, 2010, $25,000 for bodily injury to or death of one person, $50,000 for bodily injury to or death of more than one person, and $10,000 for property damage.

2. From January 1, 2010, to December 31, 2016, $50,000 for bodily injury to or death of one person, $100,000 for bodily injury to or death of more than one person, and $15,000 for property damage.

3. After December 31, 2016, the limits specified in item 2., above, adjusted for inflation and published by DOT.

This bill decreases the minimum limits required under a policy that is acceptable proof of financial responsibility to $25,000 for bodily injury to or death of one person, $50,000 for bodily injury to or death of more than one person, and $10,000 for property damage. The bill also eliminates inflation adjustments for these limits and eliminates statutory language that these limits are determined exclusive of interest and costs.

This bill does not eliminate the provisions of the biennial budget act that, as of June 1, 2010, prohibit a person from operating a motor vehicle in this state unless the owner or operator has a motor vehicle liability insurance policy in effect with respect to the motor vehicle. However, the bill affects these provisions by reducing the required coverage from the minimum limits specified in items 1. to 3., above, to $25,000 for bodily injury to or death of one person, $50,000 for bodily injury to or death of more than one person, and $10,000 for property damage.

Uninsured motorist and medical payments coverages Before the biennial budget act, all motor vehicle liability insurance policies were required to include uninsured motorist coverage in limits of at least $25,000 per person and $50,000 per accident and medical payments coverage in the amount of at least $1,000 per person, although an insured could reject medical payments coverage. Uninsured motorist coverage provides coverage for persons who are legally entitled to recover damages for bodily injury from owners or operators of motor vehicles that are not insured. Medical payments coverage pays for medical or chiropractic services provided to persons who are injured while using the insured motor vehicle. Starting on November 1, 2009, as a result of provisions in the biennial budget act, the minimum limits for uninsured motorist coverage that motor vehicle liability insurance policies must include, except for those written by town mutuals, is $100,000 per person and $300,000 per accident and the minimum limits for medical payments coverage that those policies must include is $10,000. This bill changes the required minimum limits back to $25,000 per person and $50,000 per accident for uninsured motorist coverage and back to $1,000 per person for medical payments coverage.

Underinsured motorist coverage Before the biennial budget act, motor vehicle liability insurance policies did not have to include underinsured motorist coverage but insurers were required to provide written notice of the availability of that coverage and, if an insured accepted underinsured motorist coverage after receiving notice of its availability, the policy had to include the coverage in limits of at least $50,000 per person and $100,000 per accident. Underinsured motorist coverage provides coverage for persons who are legally entitled to recover damages for bodily injury from owners or operators of underinsured motor vehicles. "Underinsured motor vehicle" was not defined in the statutes.

The biennial budget act eliminated the requirement to provide notice of the availability of underinsured motorist coverage and required, starting on November 1, 2009, every motor vehicle liability insurance policy, except for those written by town mutuals, to include that coverage in limits of at least $100,000 per person and $300,000 per accident. In addition, current law now defines an underinsured motor vehicle as a motor vehicle that is involved in an accident with an insured and which, at the time of the accident, was covered by a motor vehicle liability insurance policy with liability limits that are less than the amount needed to fully compensate the insured for his or her damages. The bill retains the requirement that underinsured motorist coverage be provided in every motor vehicle liability insurance policy, except for those written by town mutuals, and reduces the minimum required limits to $50,000 per person and $100,000 per accident. Also, the bill modifies the definition of an underinsured motor vehicle to one with liability limits that are lower than the limits of the insured's underinsured motorist coverage. The effect of this change is that, regardless of the extent of the insured's damages, there is no coverage under the insured's underinsured motorist coverage if the other vehicle involved in the accident has liability limits at least as great as the limits of the insured's underinsured motorist coverage.

Umbrella and excess liability insurance policies Current law, as a result of provisions in the biennial budget act, requires an insurer, except for a town mutual, that writes umbrella or excess liability policies that cover motor vehicle liability to make a written offer of both uninsured motorist coverage and underinsured motorist coverage whenever application is made for such an umbrella or excess liability policy. An applicant or insured may reject the coverage, but must do so in writing. If an insurer fails to provide a required written offer of uninsured or underinsured motorist coverage and the umbrella or excess liability policy does not include the coverage, or coverages, for which an offer was not given, a court must, on the request of the insured, reform the policy to include the coverage or coverages with the same limits as the liability coverage limits under the policy. Current law also excludes umbrella and excess liability policies from the statutory requirements related to the types of coverage that must be provided in a policy that covers motor vehicles and the minimum limits required for those types of coverage (coverage and limits requirements).

The bill restores former law by eliminating the requirement that an insurer writing an umbrella or excess liability policy must make a written offer of uninsured motorist coverage and underinsured motorist coverage and the requirement that a court must reform such a policy to include either coverage. However, the bill retains the current law provision that umbrella and excess liability policies are not subject to the coverage and limits requirements. In addition, the bill also excludes commercial liability policies from the coverage and limits requirements and defines those policies as ones that are intended principally to provide primary coverage for an insured's general liability arising out of its business or other commercial activities but that include coverage for the insured's liability arising out of the ownership, maintenance, or use of a motor vehicle as one component of the policy.

Miscellaneous motor vehicle insurance provisions Current law, as a result of provisions in the biennial budget act, defines an uninsured motor vehicle as including not only an unidentified motor vehicle involved in a hit-and-run accident with an insured but also an unidentified motor vehicle that is simply involved in an accident with the insured, provided that an independent third party provides evidence in support of the unidentified motor vehicle's involvement in the accident. The bill replaces that part of the definition of an uninsured motor vehicle with a "phantom motor vehicle," which is defined as one that is involved in an accident with the insured, that does not make contact with the insured or a vehicle the insured is occupying at the time of the accident, and for which neither the owner nor the operator can be ascertained. Additionally, the facts of the accident must be corroborated by competent evidence provided by someone other than the insured or any other person who makes an underinsured motorist claim as a result of the accident, the accident must be reported to the police or other authorities within 72 hours, and the insured or his or her legal representative must, within 30 days, file with the insurer a statement under oath that the insured has a cause of action for damages against a person whose identity cannot be ascertained and that sets forth the facts supporting the statement. The bill also excludes a motor vehicle that is owned by a governmental unit from the definition of an uninsured motor vehicle.

Current law, as a result of provisions in the biennial budget act, makes a number of formerly permissible provisions prohibited in a motor vehicle liability insurance policy. The bill restores former law, making the following provisions permissible in a motor vehicle liability insurance policy:

1. Providing that, regardless of the number of policies, persons, or vehicles involved, the limits for any coverage under the policy may not be added to the limits for similar coverage applying to other motor vehicles to determine an overall limit of coverage available for a person in any one accident.

2. Providing that the maximum amount of uninsured or underinsured motorist coverage available for bodily injury or death suffered by a person not using a motor vehicle in an accident (such as a pedestrian) is the highest single limit of uninsured or underinsured motorist coverage for any vehicle with respect to which the person is insured at the time of the accident.

3. Providing that the maximum amount of medical payments coverage available for bodily injury or death suffered by a person not using a motor vehicle in an accident is the highest single limit of medical payments coverage for any vehicle with respect to which the person is insured at the time of the accident.

4. Providing that the limits under the policy for uninsured or underinsured motorist coverage for bodily injury or death resulting from an accident shall be reduced by amounts paid or payable by or on behalf of a person or organization that is legally responsible for the bodily injury or death; amounts paid or payable under any worker's compensation law; or amounts paid or payable under any disability benefits laws.

Current law provides that an insurer may not place an applicant for motor vehicle insurance in a high-risk category on the basis that the applicant has not previously had motor vehicle insurance. The bill removes this prohibition.