The Risk Manager, Fall 1999
Your client is badly hurt by a careless driver. You file suit. Careless driver’s insurer certifies his liability limits are $25,000 and makes an offer of that amount. You check and learn that your client has underinsured motorist coverage of $100,000. The injuries are sufficient to justify the entire amount.
Happy days. Few situations are more pleasing than a payday in hand with more to come. Beware, however, of the statutory hurdle you must clear before accepting the first part of the settlement. Before accepting settlement the injured party or injured party’s representative must give notice of the proposed settlement to the underinsured motorist carrier. K.R.S. 304.39-320 requires written notice sent by registered or certified mail. The underinsured motorist carrier then has 30 days either to substitute payment, preserving its subrogation rights against careless driver, or to allow you to release careless driver and accept the proposed settlement.
Only by complying with this statute do you preserve your client’s right to proceed against the underinsured carrier. If you do not do so, the underinsured motorist carrier likely will take the position that it has no duty to pay your client. Careless driver has received a full release and has no legal duty to respond further in damages.
K.R.S. 304.39-320 codifies the procedure first established in Coots v. Allstate Insurance Company, Ky., 853 S.W. 2d 895 (1993). Although it is irritating to give notice and wait 30 days, you may cost your clients all of their underinsured benefits by not carefully following this statute. Your clients will then look to you.