Lawyers’ Guide to Alabama Uninsured/Underinsured Motorist Litigation

This blog post is a summary of attorney Bart Siniard’s continuing legal education presentation for CLE Alabama on December 15, 2023 hosted by the University of Alabama School of Law. In this presentation, we cover everything lawyers need to know about Alabama uninsured/underinsured motorist litigation.

More than half of car accident lawsuits involve uninsured or underinsured motorists.  According to data from 2022, 19.6% of drivers are uninsured and more than 30% have the minimum liability policy limits.  Therefore, any Alabama lawyer handling car accident cases must know the intricacies of uninsured/underinsured (UM/UIM) substantive and procedural law.

Bare Bones Basics of Alabama Uninsured/Underinsured Motorist Laws

Ala. Code 32-7-23 is the statute that makes uninsured/underinsured motorist coverage mandatory in Alabama and defines the scope of coverage. While too lengthy for a blog post, the statute essentially requires insurance carriers to offer it to insureds.  Pursuant to the statute, an insured has uninsured/underinsured motorist coverage unless he or she rejects the coverage in writing.

Alabama courts have construed Ala. Code § 32-7-23, and its predecessor statutes, as requiring “uninsured protection…in all automobile liability policies unless rejected by the named insured.” State Farm Mut. Auto. Ins. Co. v. Martin, 289 So. 2d 606, 608 (Ala.1974).

The purpose of the uninsured motorist statute, “and thus the public policy of the State as to this matter,” is to allow those purchasing liability insurance coverage to “be able to obtain for an additional premium” protection from injuries caused by an uninsured motorist. Higgins v. Nationwide Mut. Ins. Co., 282 So. 2d295, 300 (Ala. 1973).

Courts interpret all automobile liability policies as providing the required coverage, unless the coverage has been rejected in writing. Furthermore, the rejection must be signed by each named insured. An electronic signature is acceptable, but is more vulnerable to being challenged. See Johnson v. First Acceptance Ins. Co., 227 So. 3d 77 (Ala. Civ. App. 2017).

Coverage Questions in Alabama Uninsured/Underinsured Motorist Litigation

In many instances, there will be a dispute as to whether a UM/UIM policy covers the incident in question. There are several important principles to be aware of when addressing a coverage question.

Policy provisions or exclusions more restrictive than allowed by the statute are void and unenforceable. An insurer may not deny benefits by inserting provisions restricting an insured’s right of recovery. For example, corroborative evidence requirements are not permitted. Walker v. Guide One, 834 So. 2d 769 (Ala. 2002).

When there is a dispute as to whether the policy language covers the incident, the first question to address is whether the relevant policy language is “ambiguous.” Ambiguities in policy language must be resolved in an insured/plaintiff’s favor pursuant to Altiere v. BCBS of AL, 551 So. 2d 290 (Ala. 1989).

Example of Ambiguous Policy Language

For example, in Nationwide Prop. & Cas. Ins. Co. v. Steward, 323 So. 3d 36 (Ala. 2020), a policy language dispute arose out of the phrase “on public roads.”  There was an exclusion from coverage that stated an uninsured motor vehicle shall not include “any equipment or vehicle designed for use mainly off
public roads except while on public roads.” Plaintiff was riding an ATV which collided another ATV at an intersection of roads in a publicly owned and operated
ATV park. The insurer argued that the roads inside the park where the collision occurred were not public because they were not accessible to the public without paying a fee and signing a waiver. Plaintiff contended they were public because they were publicly owned, were maintained using public funds, and were open to the public for recreational purposes.

The court agreed with plaintiff’s argument that the policy term “public roads” was ambiguous, as it was not defined in the coverage and did not have any
generally accepted meaning, citing Alan I. Widiss & Jeffery E. Thomas, Uninsured and Underinsured Motorist Insurance § 810 (3d ed. 2005).   Because  plaintiff’s  interpretation of “public roads” was reasonable, the court held the term ambiguous in this case, which must be resolved in plaintiff’s favor.
Because the roads in the park were “public roads” for purposes of the policy, the ATV was an uninsured motor vehicle.

Example of Unambiguous Policy Language

The Court in Alfa v. Warren, — So. 3d –, 2022 WL 4588874 (September 30, 2022), is an example of where the Court found policy language to be unambiguous and thus ruled in favor of the insurer.  A mother whose children were in foster care brought suit against at-fault driver and the foster mother’s UIM carrier, Alfa. Alfa filed a motion for summary judgment contending that the children were not “family members” under the Alfa policy for purposes of UIM coverage. The trial court in Marshall County denied Alfa’s motion and Alfa appealed. The Supreme Court agreed with Alfa since the policy defined “family members” as “a person related to you by blood, marriage or adoption who primarily lives with you. The court considered this language to be “clear and unambiguous” and ruled in Alfa’s favor.

In short, in policy coverage questions, always evaluate and research whether the relevant policy language is ambiguous.  Ambiguities favor the plaintiff and certainties favor the insurer.

Stacking of Alabama Uninsured/Underinsured Motorist Coverages

Ala. Code § 32-7-23(c) states that the recovery by an injured person under the uninsured provisions of any one contract of automobile insurance shall be limited to the primary coverage plus such additional coverage as may be provided for additional vehicles, but not to exceed two additional coverages within such contract. Therefore, an injured plaintiff can stack up to three coverages on a single policy.

Importantly, there is no limitation on the number of individual polices that can be stacked. Therefore, if an injured plaintiff has five separate policies with one car insured on each policy, the plaintiff could stack five coverages.  However, you can only stack coverage from policies under which an insured would be provided liability coverage. See State Farm v. Jackson, 462 So. 2d 346 (Ala. 1984).

“Resident Relative” Issues in Alabama Uninsured/Underinsured Motorist Cases

UM/UIIM coverage will cover resident-relatives of the named insured.  For example, if an injured plaintiff lives with his brother, the plaintiff can use his brother’s UM/UIM coverage to seek compensation for injuries.

A “ Resident Relative” will be a defined term in the policy. Generally, in Alabama, it is defined in the policy as

a person related by blood or marriage who lives in the same household.

In many cases, the issue is whether the relative “resides” in the household. Most Alabama insurance policies define “resides” as “lives primarily with.” The word “primarily” was held to mean “for the most part, chiefly” in B.D.P. and P.S. v. State Farm, 814 So. 2d 877 (Ala. 2001).

The Court has held that an individual can only “primarily” live in one place State Farm v. Harris, 882 So. 2d 849 (Ala. 2003). This is especially important in cases involving children of divorced parents. The child can only “primarily” reside with one of them.

The Lambert Process — Settlements with the Tortfeasor

Lambert v. State Farm, 576 So. 2d 160 (Ala. 1991) sets forth the procedures a plaintiff and insurer must follow when a plaintiff intends to accept a liability settlement offer.

Generally, when the plaintiff reaches a tentative settlement with the tortfeasor, the plaintiff must provide the UIM carrier with notice of the settlement. The UIM carrier then has a “reasonable time” to decide whether to consent to the settlement, or “front” the settlement amount.  A failure by the plaintiff to provide the UIM carrier with notice of the settlement can result in loss of rights to recover UIM benefits.

When a tentative settlement is reached, the plaintiff must notify the UIM carrier of the proposed settlement. The plaintiff must also inform the UIM carrier if he/she intends to seek UIM benefits. Confirmation that the plaintiff intends to seek UIM benefits is required to trigger the carrier’s duty to investigate. Morgan v. Safeway Ins. Co. of Ala., Inc., 13 So. 3d 381 (Ala. Civ. App. 2007)

Once notified the plaintiff intends to continue seeking UIM benefits, the insurer should immediately begin investigating the claim, conclude the
investigation within a reasonable time, and notify the plaintiff of the action it has chosen.

The insurer has two options:

1. Waive its right to subrogation and consent to the liability settlement; or
2. Refuse to consent and advance (or “front”) the liability settlement offer.

If the insurer takes option #1, the tortfeasor is released and dismissed.  The case then continues as a direct action against the insurer.

If the insurer takes option #2, the insurance carrier preserves its right to subrogate against the tortfeasor and the tortfefasor cannot be released/dismissed.  The case continues to proceed with the tortfeasor as a named party.

At issue in many cases is whether the insurer has made it’s decision within a “reasonable time period.”  Appellate courts have stated in that, absent compelling circumstances, “30 days would seem to be a reasonable period of time.” Morgan v. Safeway Ins. Co. of Ala., Inc., 13 So. 3d 381 (Ala. Civ. App. 2007). While no case has conclusively set 30 days as the required “reasonable” amount of time, Morgan and cases cited within it heavily imply that 30 days would probably not be considered unreasonable (absent compelling circumstances).

When UM/UIM Carrier Elects to “Opt Out”

In Alabama uninsured/underinsured motorist litigation, usually the tortfeasor and the UM/UIM carrier are both named as defendants. A UM/UIM carrier has the option to “opt out” prior to trial.  If it does so, the UM/UIM carrier is not considered a party at trial, but it is bound by the verdict/judgment.

Lowe v. Nationwide, 521 So. 2d 1309 is the seminal case about “opt outs.” In Low, the Court stated the insurer has the right to elect to participate in the trial (and have its identity and reason for involvement known to the jury) or not participate in trial (in which case no mention of the carrier or its potential involvement is
permitted). An insurer that opts out no longer has the right to participate in discovery. Ex parte Edgar, 543 So. 2d 682 (Ala. 1989). Election must be made “within a reasonable time after service”.

But what is a reasonable time in which to elect to opt out?

The court has held that it was “not unreasonable” for an insurer “to participate in the case for a length of time sufficient to enable it to make a meaningful determination…” Ex parte Edgar. Waiting until after the plaintiff’s treating physicians had been deposed has been determined to be “reasonable.” Ex parte Electric Ins. Co., 164 So. 3d 529 (Ala. 2014). Therefore, an insurer can wait a long time to make it’s opt out decision, but generally cannot do so on the eve of trial without good cause. In addition, a UM/UIM carrier cannot opt out of litigation if they previously intervened. Ex parte Alfa Mutual Ins. Co., 333 So. 3d 925 (Ala. 2020).

Conclusion

Understanding the intricacies of Alabama uninsured/underinsured motorist laws is vital for all lawyers prosecuting or defending auto accident cases.  We hope the above has provided you with guidance to better serve your clients.