Umbrella Coverage, Come Rain or Shine: Explaining the concept of uninsured/underinsured motorist coverage

Published in the New Hampshire Business Review
By: Scott H. Harris

It’s about 8:30 p.m. on a Friday evening. Joe is on his way home from the airport after having spent a week at a medical equipment sales conference in Chicago. He slows and then stops behind a line of cars waiting at the tollbooth. A drunken driver, who is paying no attention to the road, does not see the line of cars and slams into the back of Joe’s car. The truck had been traveling in excess of 60 miles per hour. The emergency crew transports Joe to Boston. He survives, but his brain injury keeps him from returning to work.

Joe has a right to recover from the drunken driver, right? Yes, but the driver had an insurance policy with $25,000 limits and, other than that, nothing. All that Joe will be able to recover from the driver will be $25,000.

Meanwhile, Joe’s medical expense (at least his hospital stay) is paid for by health insurance, but he has no other insurance to help him with his lost income or any of the other extraordinary expenses caused by the drunken driver. There is certainly nothing to help compensate him for the huge loss he will suffer in the quality of his life as he struggles to recover from a severe brain injury.

Understanding the concept of uninsured/underinsured motorist coverage and how an umbrella policy enhances the limits of uninsured/underinsured coverage can help those like Joe protect against such huge losses.

Underinsured/uninsured coverage pro-vides coverage for a driver’s injuries caused by another when the individual causing the accident has either no insurance or whose insurance is less than the injured party.

For example, if Joe has an automobile policy that would cover $100,000, if he inflicts harm on others, then he automatically has coverage of up to $100,000 if he (or someone in his car) is injured up to the extent the offending driver has less than $100,000 in coverage.

In this instance, since the drunken driver had $25,000 of insurance, Joe’s underinsured/uninsured coverage would provide him and his family $75,000 to help offset some of their enormous loss.

The $75,000 Joe gets from his underinsured coverage will not go far. Umbrella insurance coverage is one way to extend the insurance coverage protecting the injured driver or occupant of a covered car.

An umbrella policy, usually issued with limits of $1-2 million in coverage (although $5 million or more in coverage is not extraordinary) provides another layer of coverage above and beyond the primary limits of the policyholder’s other insurance limits.

For instance, a $1 million umbrella policy increases the limits of homeowner’s liability coverage (that would cover you if, say, someone blames you for their slip and fall on your icy sidewalk) to $1 million as well.

Thus, if Joe had a $2 million umbrella policy in place at the time of the crash, he would have recovered $1.975 million for his injuries (which exceed that dollar value).

So important is this feature of umbrella coverage that New Hampshire state law provides special protection to assure that the umbrella coverage enhances underinsured/uninsured motorist coverage. Umbrella coverage is also relatively inexpensive, costing about $500 a year – an amount that can seem like a lot, but when you need the coverage, you’ll be glad to have it.

Scott Harris, a director in the Litigation Department of McLane, Graf, Raulerson & Middleton, Professional Association can be reached at 603-628-1459 or