Picture this. You file a bodily injury claim under your UM coverage. You and your insurance carrier have reached an impasse over whether you have a claim and/or on the amount. What is your next step? Arbitration: a third party will figure out who is responsible for what, and both parties stay out of the court room.

Check out the arbitration section of your policy’s UM coverage which typically reads:

Explanation

Any disagreements over payment or amount of payment will be resolved by an outside arbitrator on written demand of either the insured or the insurer. Regarding who pays for the services of the arbitrator, the California Code of Civil Procedure in our sample fault-based policy states that:

…unless the arbitration agreement provides otherwise,… each party to the
arbitration shall pay his pro rata share of the expenses and fees of
the neutral arbitrator, together with other expenses of the
arbitration incurred or approved by the neutral arbitrator, not
including counsel fees or witness fees or other expenses incurred by
a party for his own benefit. (Your individual policy may differ from the statutory language)

In other words, either you agree up front who pays, or you pay your proportional share plus your attorney and witness fees and any other expenses you incur to help your case. Any arbitration award must not be more than the policy limits for UM.

If there is a dispute regarding coverage, arbitration is put on hold until the insurance company and the insured come to an agreement, or it’s decided by the court.

Other Duties

In “Understanding your Insurance Policy – Introduction” we talked about what your duties are as an insured under the policy. There are some further duties under the UM section. The policy states:

The insurance company wants to make sure that the underinsured motorist who is responsible for your injuries is taking care of your expenses to the extent his or her policy limits will allow. To show this, you must provide your insurer with proof that you are taking some legal action against the responsible driver or the company for whom that driver works. The policy does not appear to address the scenario where you are simply making a claim with the underinsured motorist’s insurance company and settling it without any litigation. Although it doesn’t say so here, it would be a fair assumption that your insurance company would want a copy of the settlement papers to make sure you settled for the policy limits, since underinsured motorist coverage doesn’t kick in until those underlying limits have been exhausted.