How Can an Umbrella Policy Protect Me Following a Car Accident?

Many Georgia residents take out “umbrella” policies to provide extra insurance protection in the event of an accident. An umbrella policy provides liability coverage above and beyond standard homeowners or automobile insurance. For example, let’s say your auto insurance policy provides $25,000 in coverage for bodily injury. You get into an accident and the other driver sues you for damages. The court awards the driver $100,000, which obviously exceeds your policy limit. At this point, if you have an umbrella policy, which typically provides coverage in the millions of dollars, it would cover the rest of the judgment.

Massey v. Allstate Insurance Company

You can also purchase an umbrella policy for uninsured motorist coverage. This refers to insurance that pays for injuries that you sustain in an accident caused by another driver who either has no insurance or lacks sufficient coverage to pay for your total damages. Georgia law requires all insurers to offer uninsured motorist coverage of at least $25,000 for bodily injury to a single person (or $50,000 for multiple people injured in the same accident). The customer has the option of rejecting UM coverage, but it must be offered.

If your insurer seeks to cancel coverage, it must strictly follow certain procedures spelled out in Georgia law. This also applies to umbrella policies. In fact, the Georgia Court of Appeals recently addressed this issue.

This case involved a woman who was seriously injured in a 2012 car accident. She sued the other driver for negligence and settled for the limits of his auto insurance policy. Because the victim’s damages exceeded that limit, she then sought coverage under her own UM policy. She then sought additional UM coverage under her umbrella policy.

The insurer claimed it had canceled the UM portion of the victim’s umbrella policy approximately two years earlier by sending a notice to her mailing address. The victim said she never received such notice, and in any event, Georgia law says a non-renewal notice must either be delivered in person or sent by first-class mail with return receipt. By law these requirements “must be exactly followed,” or the insurer’s cancellation is not valid.

Before the Court of Appeals, the insurer tried to argue the notice requirements did not apply to umbrella policies like the one at issue, only “primary” auto insurance coverage. The relevant Georgia statute states that it applies to policies that provide “uninsured motorists’ protection coverage or any combination of coverages.” The Court of Appeals said this “plain language” clearly included the victim’s umbrella policy. There was nothing to indicate that Georgia legislators “intended to limit” the statute’s application to primary but not umbrella policies, and the Court said it saw “no reason why such a distinction should be read into the statute.”

Since the notice requirement applied to the insurer, the Court then addressed the insurer’s non-compliance. As noted above, if an insurer mails a notice of non-renewal, it must include a return receipt from the Post Office. The insurer could produce no such receipt, and in fact argued it would impose an “unreasonable” burden to require it to produce such a receipt.

But the Court of Appeals reiterated that the law is “clear and must be strictly followed.” As a result, the Court said the umbrella policy was never properly canceled and remained in effect at the time of the victim’s accident. The insurer is therefore for any excess liability.

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