Higher auto liability limits are just a start

When he signed SB 1107 into law on Sept. 28, California Gov. Gavin Newsom was finally bringing California into the modern era of victim compensation. Other states had long ago raised the mandatory minimum limits on automobile liability policies; California was simply playing catch-up.

But SB 1107 is only a first step. The next step is to let injury victims obtain compensation from their own underinsured motorist coverages, regardless of the at-fault party's liability limits. Californis's low liability limits, coupled with its ban on "stacking" policies - which would let victims be compensated through their underinsured motorist coverage, regardless of the limits on the at-fault party's policy - have meant that individuals who were seriously injured by the actions of others were saddled with huge medical and other expenses for which they had no support.

The potential payout from insurance carriers - as low as $15,000 for bodily injury or death of one person, $30,000 for multiple injuries or deaths, and $5,000 for damage to property - fell woefully short of addressing their needs. To make matters worse, injury victims who could only afford the same minimum underinsured motorist limits could not - and still cannot - seek compensation from their own underinsurance policies because California law prohibits "stacking" of minimum limits.

Every day I would meet with clients whose lives had been turned upside down because of the bad actions of other drivers, and I would have to explain to them that the most we could hope to recover was a measly $15,000 for each claimant. I also had to explain that California law did not allow them to tap into their own underinsured motorist coverage. Whatever sum we were able to recover was grossly insufficient to make a dent in their medical bills, not to mention loss of income, pain and suffering.

The victims who were most impacted by these unconscionably low liability limits were those with the least means and the lowest incomes. They generally had little or no coverage under their own policies to make up for losses attributable to uninsured or underinsured motorists. And when they did have minimum underinsured motorist coverage, California law would not allow "stacking" of identical underinsured and at-fault liability limits. They would spend the rest of their lives paying for what had happened to them, through no fault of their own.

SB 1107 has finally moved California closer to the rest of the country with respect to minimum at-fault liability limits. The state may be at the cutting edge in other areas, but it has been positively neanderthal when it comes to protecting its most vulnerable motorists when they most need help. The new law will amend the Insurance and Vehicle Codes to make it possible for these drivers to receive better recoveries from insurance carriers.

The new limits - $30,000 for individual injury claim or death, $60,000 for multiple claims or deaths per incident, and $15,000 for property damage - will substantially ease the burden on these victims. And when those limits increase to $50,000/$100,000/$25,000 in 2035, they will be in line with inflationary and other cost-increase factors.

It is, however, too soon to celebrate. Bureaucratic challenges associated with insurance rate changes will delay implementation of the new law until 2025. The limits, although more generous, still fall far short of the amount required to pay the typically high cost of medical treatment and ongoing physical care of those who have been severely injured.

And that is why the next step must be to allow "stacking," so that injury victims obtain compensation from their own underinsured motorist coverages, regardless of the at-fault liability limits. When a person is injured by a driver who lacks sufficient coverage, underinsured coverages are intended to provide a safety net that helps fill the coverage gap. This is certainly true for customers with the means to pay for higher policy limits, but it is not the case for those who can afford just the minimum coverage.

To be clear: Uninsured motorist coverage will kick in if the at-fault driver lacks insurance. But if that driver has any insurance, the victim's own underinsured coverage is not triggered if the coverage limit is not more than the at-fault party's liability limits. In other words, a victim's underinsured limit does not stack on top of the at-fault party's liability limits if the underinsured limits are the same as or less than the at fault party's liability limits. To truly bring California into the modern era of equitable compensation for victims, this must change.

It is well past time for California to do what's right for accident victims. Instead of relegating them to the slimmest of recoveries, the law should be changed to allow policies to be "stacked" on top of each other so that victims can realize a more complete recovery. It's not a novel idea. In other states, such as Nevada, underinsured policies are added on top of the offender's policy, regardless of the limits on those policies. Victims - who bought and paid for underinsured motorist coverage - can realize the benefits of those policies, doubling or even tripling the amount they ultimately recover.

The higher liability limits established by SB 1107 are an important first step, but more must be done to rectify a broken and unconscionable system. Unlike changes to insurance policy limits - which require time and administrative steps to implement - a change that allows a victim's uninsured/underinsured policy to be "stacked" on top of the offending driver's policy can be enacted and implemented quickly. If California legislators are truly concerned about the fate of accident victims, this must be their next move.