Stein & Shulman represented a tractor-trailer driver that worked for a general freight company. He lived in Illinois and worked for less than $20 per hour and was typically gone for days or weeks at a time delivering freight. Unbeknownst to him, his employer had failed to purchase workers compensation insurance coverage to protect him in the event that he was injured while working. Sure enough he was involved in a hit and run accident in Wyoming in which he sustained numerous injuries; most notably a total left arm amputation.
Under Illinois law this type of tractor-trailer must carry bodily injury coverage at limits of $1,000,000.00 and Uninsured Motorist (UM) coverage limits that are automatically set as the same amount as the insured’s general bodily injury limits. UM insurance coverage protects you if you’re in an accident with an at-fault driver who (i) doesn’t have liability insurance OR (ii) if the at-fault driver is a hit-n-run driver. In this case, the employer had not only failed to obtain work comp coverage, but also agreed to waive its UM coverage of $1,000,000.00 down to the statutory limits of $40,000.00. While trucking companies must carry bodily injury coverage of $1,000,000.00; they have the option of reducing their UM coverage to the statutory minimum limits.
In this case, the trucking company said to its insurance broker, we want to comply with the law in Illinois regarding insurance coverage limits and we want to spend the least amount possible. In response, in an effort to minimize the dollar amount of the trucking company’s premiums, the insurance broker signed a document on behalf of the trucking company waiving the UM limits from $1,000,000.00 to $40,000.00. Now, most employers and individuals do not understand these complex insurance coverage issues. Let’s face it – most people do not walk into an insurance company’s office and read the fine print of the policy and if they did, they probably wouldn’t understand the legal concepts expressed within the policy.
Accordingly, the law in Illinois states that Under Section 143a-2(1) of the Illinois Insurance Code (Code) (215 ILCS 5/143a-2(1) (West 1998)) UM limits are automatically set as the same amount as the insured’s general bodily injury limits, the insurer need only explain the nature of UM insurance and that the insured has the right to reduce those coverages to as little as $20,000 per person/$40,000 per occurrence, and once the explanation is provided, an insured preferring less UM coverage has the duty to reject and reduce the limits of those coverages. Pajic v. Old Republic Insurance Company, 394 Ill.App.3d 1040, 1042 (1st Dist. 2009).
In our case, the employer never received an explanation from the broker regarding the nature of UM insurance. At no time prior to the issuance of the insurance policy did the applicant ever advise its broker that it wanted UM coverage limits that were less than the bodily injury limits of $1 million. In fact, at no time prior to the issuance of the insurance policy was the topic of UM coverage ever discussed with the applicant. The only thing the employer stated to its broker was “find a way to make my premiums as little as possible”. Clearly the broker failed as an insurer to comply with §143a-2(1) of the Code. Accordingly, the Court reformed the policy limits from $40,000.00 to $1 million and the case resolved for the policy limits.
Reducing or “waiving” insurance coverage is a complicated matter and must be done in conformity with the Illinois Insurance Code. Courts have an obligation and a duty to examine these types of situations with an eye towards protecting the injured party and upholding the public policy considerations that influenced or shaped the Code.
If you are handling a case wherein the UM/UIM limits were waived there must be an examination and investigation into (i) the circumstances that led to the waiver and what forms were executed to effectuate the waiver and (ii) what discussions and communications took place prior to the UM/UIM limits being reduced. Please feel free to call us for advice should your set of facts fall within the situation described above at 312.422.0500.
