In part one we learned about how Colorado Revised Statute 10-4-609 effects your insurance coverage and about thedifferent types of coverage; liability and uninsured and under-insured insurance.
Here’s how it all fits together.

What is “Setoff”?
Prior to January 1, 2008, your insurance company would be able to “setoff” or reduce the amount of UM coverage they would have to pay you by the amount of liability insurance available from the at fault driver.

Example:
Kendra was driving home from work and was hit by Josh after a night out drinking with his buddies. His blood alcohol level was above the legal limit and he was cited for driving under the influence. Kendra was severely injured and spent many months in the hospital and in rehab. She was unable to work during her recovery time and her medical expenses and lost wages totaled $250,000. Josh had insurance but his bodily injury liability policy limit was only $50,000. Kendra had purchased $200,000 in UM/UIM safety net coverage on her own policy.

Conclusion Before January 1, 2008:
After Josh’s insurance company paid Kendra the $50,000 per Josh’s policy limits, Kendra’s insurance company was then able to deduct or “setoff” that $50,000 from her UM/UIM coverage, leaving her with only an additional $150,000 in coverage. Her total compensation was $200,000 and she was left to pay the remaining $50,000 out of her own pocket.

Conclusion After January 1, 2008:
Josh’s insurance company paid Kendra the $50,000 per Josh’s policy limits. Kendra’s insurance company was legally obligated to pay her the total of her UM/UIM policy limits of $200,000. Her total compensation was $250,000 which covered all of her medical expenses and lost wages.

To be continued. Next up: “What is Anti-Stacking”?