Drivers in Colorado and across the U.S. have to purchase and maintain a minimum amount of automobile insurance coverage. Sometimes though, a driver is uninsured (UM) or underinsured (UIM), which is where a person’s uninsured/underinsured motorists coverage kicks in.
But loopholes existed prior to the beginning of 2008 that prevented Colorado drivers from receiving the full amount of coverage they thought they purchased.
One of the loopholes allowed car insurers in Colorado to “setoff”, or reduce the amount of compensation they paid by the amount of liability insurance available from the at-fault driver.
For example, a woman in Denver is hit by an underinsured motorist who causes $250,000 in lost wages, expenses and damages. The at-fault driver only has $50,000 in liability coverage and the woman has $200,000 in UM/UIM coverage. Before 01/01/08, her insurance carrier was able to “setoff”, or deduct $50,000 from her coverage. Therefore, she would only receive $200,000 in total compensation, leaving her $50,000 short.
Changes enacted in 2008 reformed this practice and now the insurance company is legally obligated to pay up to her policy limits of $200,000 and is not allowed to “setoff”. Now she can receive full compensation for her injuries.
“Anti-stacking” language in car insurance policies was another practice these reforms banned. Suppose a family has 3 vehicles that each have $100,000 in UM/UIM coverage – meaning they have paid for a total of $300,000 in coverage. Prior to 2008, insurance companies could limit the coverage to $100,000 on one car policy despite the family paying premiums for $300,000 worth of coverage on 3 different vehicles.
The new laws now allow drivers to “stack” their coverage. So if one of the family’s vehicles is involved in a crash with an uninsured or underinsured motorist, they can combine all three of their policies for a grand total of $300,000 in coverage for that incident.
These new Colorado car insurance laws took effect on all policies issued or renewed after January 1, 2008.