Defective UM Rejection and a Demand Against the Underinsured Motorist Carrier
A driver is rear-ended on the I-10 high rise in New Orleans. Special and general damages are estimated at $90,000. The at-fault driver carries 15/30 limits and his carrier has tendered $15,000. The injured driver's own policy, renewed twice since inception, shows 250/500 liability limits and UM coverage marked 'rejected.' The rejection is on the insurer's own form, not the form prescribed by the Commissioner, and three years ago was signed by the named insured's 19-year-old son, who lives at home. The underwriting file contains no other rejection. Claimant's counsel has sued both drivers and the UM carrier and demands $90,000 from the UM carrier.
1. Is there UM coverage, and at what limits?
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Louisiana makes UM coverage mandatory unless the named insured rejects it in writing on the form prescribed by the Commissioner (La. R.S. 22:1295). Two defects appear:
- Wrong form. The insurer's own form does not satisfy the statutory requirement.
- Wrong signer. The rejection must be signed by the named insured or someone legally authorized to act for him. A resident 19-year-old son is neither a legal representative nor shown to be authorized.
A defective rejection is treated as no rejection, and UM coverage is read into the policy at the liability limits of 250/500, not the statutory minimum, because the insured never validly selected lower limits. Renewals do not cure the defect unless a valid form was signed at a later issuance.
Action: pull the original form, the underwriting file, and any e-signature audit trail; ask the carrier whether a valid rejection exists anywhere else. Absent one, evaluate at 250/500 and stop arguing the rejection.
2. Assume coverage exists. Compute the UM carrier's exposure and identify the conditions to protect before paying.
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Arithmetic. Damages of $90,000, less the tortfeasor's $15,000 credit = $75,000 owed by the UM carrier, well within 250/500. Reduce further for any comparative fault allocated to the claimant; a rear-end collision usually leaves little, but confirm.
Conditions before payment.
- Document the $15,000 tender; the claimant cannot recover the same dollar twice.
- Obtain the release of the tortfeasor and confirm it preserves the UM carrier's subrogation rights. A release that discharges the tortfeasor without the carrier's consent can impair the carrier's recovery, and the carrier is subrogated to the extent of its payment.
- Naming the tortfeasor's carrier as a defendant is proper under Louisiana's direct-action statute (La. R.S. 22:1269). The UM carrier is a party by contract in any event.
The UM exposure is the gap, not the whole $90,000.