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WHAT HAPPENS WHEN THERE IS LIMITED INSURANCE AND MULTIPLE VICTIMS?

In some Maryland auto accidents, there is simply a limited insurance available. We see this frequently in bus accident cases and collisions involving multiple vehicles. If there are many people with injuries, the at-fault driver’s insurance policy may not be large enough to pay for those injuries. How is the money divided up?

The Set-up

An example fact pattern will help to explain this. Let’s say you are on a bus, which is hit by distracted teen who is texting on her cellphone. The teen driver has the lowest possible MAIF insurance–a policy of $30,000 per person, and $60,000 per accident in liability coverage. That means that her insurance company will pay a maximum of $30,000 for each victim, with limits of $60,000 to pay to all victims in a single accident.

The Exception: Underinsured Automobile Coverage

First, there is a way to protect yourself. If you have your own automobile insurance, you can guard against this problem. Your insurance company is on the hook to pay for your injuries if they are caused by someone else and there is limited insurance available. For example, let’s say the value of your Maryland automobile accident lawsuit is $20,000. In the situation above, where the negligent driver had an insurance policy of $30,000 per person and $60,000 per accident, and there were other people injured in the accident, you might be forced to take a low settlement. Let’s say the negligent driver’s insurance company decides that they can pay you $10,000 (and they pay a total of $50,000 to the other victims). Your insurance company, then, would step in and (either voluntarily, or more likely after being forced to by a court) would be responsible to pay you the other $10,000. This is why underinsured motorist coverage is important to protect you, your family, and your passengers. We urge you to contact your insurance agent immediately, and make sure you enough coverage–the more, the better. Otherwise, you could be in an accident with permanent injuries, and might get less than $30,000 for your troubles.

Dividing The Money

If you don’t have underinsured motorist coverage, you may be limited to the available insurance. This means in the example above, the insurance company is on the hook for a maximum of $60,000 to be divided among all injured victims. If the driver was clearly negligent, the insurance company will usually offer the full policy to each claimant, and ask them to divide it among themselves.

Sometimes this is easy: the lawyers might get together and simply agree on an equitable distribution of money. One common method is to take every person’s medical expenses, and give them a pro rata share of the money. So, if you have five victims with $5,000 in medical expenses each ($25,000 total), then they each have a one-fifth claim to the entire pot. If there is $60,000 to divide up among all of them, each plaintiff would receive $12,000 ($60,000 divided 5 is $12,000). Pro Rata Settlement (02-26-13).xlsx.

This gets a little hairy when there are outlier claims–for example, one person with a very significant injury. Also, if one or more claimants have injuries that are disproportionately represented by their medical bills–say, a permanent injury for which there was very little treatment, a simple division might be unfair. Finally, this does not consider things like respective pain and suffering or lost wages (which could be included in the calculation, if desired).

When it gets really complicated (which really means when the lawyers won’t agree on a distribution formula), then there is litigation. The insurance company will often take the money, give it to the court in what’s called an Interpleader action, and ask the court to divide it up. The insurance company files against all of the claimants, and then they can fight it out in front of a judge or jury.

Finding All Of The Claimants

One of the biggest problems is resolving these claims in a timely matter. A common situation is a bus case, where there are say 20 people on the bus. If only 5 people are injured, the insurance company will still demand that other 15 people waive their rights to a claim. In Baltimore City especially this can be difficult–it requires a Herculean effort to locate those other passengers. If they can’t be located, a judge in an interpleader action must find them to have waived their rights by not responding to the lawsuit, otherwise, they have three years from the date of the accident to bring a claim. This can add a great deal of time to these claims.

For More Information

Negotiating multiple-claimant settlements can be difficult, particularly because the insurance company’s responses are often so frustrating–early on, they will refuse to negotiate until all claims are in. To some degree, there’s not much that can be done about the waiting period. However, it can be comforting to have someone explain the process. For more information, click the links below.