Senate Bill 256 – Getting Consumers What They’ve Paid For

Quick question. Do you really understand how your uninsured/underinsured motorist coverage (“UM/UIM”) currently works in Colorado?

Allow me to demonstrate. Let’s say you carry $25,000/per person and $50,000/per person in UM/UIM coverage and you’re involved in a serious motor vehicle accident. The person who hit you (i.e. the “at fault” driver) carries liability insurance in the amount of $25,000/per person and $50,000/per person. Your damages, through medical bills, time lost from work, pain and suffering, are at least $45,000.00. You bring a claim against the at fault driver’s insurance policy and you settle for policy limits, i.e. $25,000.00, which is at least $20,000.00 less than your total damages. No problem, you think, that’s why I pay premiums for liability and UM/UIM coverage, I’ll make a claim against my own insurance company under my UM/UIM, right? WRONG.

Under Colorado law, insurance companies are entitled to what’s known as a “set-off.” This means that insurance companies who issue Colorado policies can set-off the amount paid to you under the at-fault driver’s insurance policy from your own UM/UIM coverages.

So going back to the previous example, since you recovered the $25,000 from the at fault drivers’ policy and your own UM/UIM limits are $25,000 you recover NOTHING from your own UM/UIM policy. This means that the higher premiums you’ve paid throughout the years for your liability and UM/UIM coverage has gone to waste, you are precluded from getting any money under your own insurance policy despite the fact you have at least $20,000.00 in damages due to no fault of your own.

Senate Bill 256 will change this pro-insurance company loophole. If enacted, this bill expressly provides that insurers will not be entitled to a set-off. Meaning, in this example, you would be able to recover your total amount of damages, i.e. the $25,000 from the at fault driver plus an additional $20,000.00 to cover all of your damages. Just think of it as getting what you paid for. Embrace the idea that you’ll continue to faithfully pay your premiums and if you ever have to make a claim, you will actually receive the benefit you’ve paid for.