New Jersey and Pennsylvania have similar auto insurance laws. Both states have the no-fault system in place. What this means is that regardless of who caused the accident, the injured driver or passenger's own insurance company pays for their own medical expenses under their medical benefits coverage, also known as PIP. Therefore, if a PA or NJ driver sustains injuries after a driver violently rear-ends his vehicle, he will look to his own insurance company to pay for medical expenses incurred related to the rear-end accident.
Both New Jersey and Pennsylvania auto insurance policies also offer a very important coverage called underinsured motorist (UIM) or uninsured motorist (UM) coverage.
UM applies in car accidents where the at-fault driver does not have insurance, or if the at-fault driver leaves the scene of the accident and cannot be located.
If the injured driver has $30,000 in UM coverage and his injuries are valued at $30,000, he may recover $30,000 by filing a UM claim with his own car insurance company. However, if his injuries are valued at $50,000, the injured driver will still only receive $30,000 because that is the amount of coverage he purchased.
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UIM applies in car accidents when the at-fault or negligent driver's liability coverage is not enough to compensate the injured driver or passenger. In other words, the at-fault driver is underinsured. Although UIM cliams are allowed under car accident laws in both NJ and PA, UIM laws in each state are slightly different. For instance, an injured driver from PA and an injured driver from NJ will recover different amounts of UIM benefits even if the accidents, the at-fault driver's liability coverage and the injured drivers' UIM policy limits are the same. How can that be? Below are examples that will help explain this confusing issue.
A PA driver has $100,000 UIM coverage and is injured in a car accident. If the at-fault driver has $15,000 in liability coverage, and the value of the injured driver's injuries and damages exceed $15,000, he will receive $15,000 from the at-fault driver. He can then recover the rest of his damages by filing a UIM claim. The maximum amount he may receive from his UIM claim is $100,000. Therefore, the maximum amount of recovery the driver may receive is $115,000 as a result of the car accident.
However, using the same scenario above, we get a very different result if the car accident happened in NJ and involved a NJ driver and NJ UIM claim. That's because NJ UIM insurance coverage is considered "gap coverage," i.e., fills the gap between the at-fault driver's insurance coverage amount and the insured's UIM coverage amount.
Even though the driver purchased $100,000 of UIM benefits, the amount he recovered from the at-fault driver, $15,000, is deducted from the maximum amount of UIM benefits. Therefore, the NJ driver's maximum amount of UIM recovery from his own car insurance company is $85,000, after the $15,000 is deducted. The maximum amount of recovery the driver may receive is $100,000.
Filing UIM/UM claims with auto insurance companies can be very frustrating and confusing for injured drivers in both New Jersey and Pennsylvania. Let the lawyers at White and Williams help you. Daniel J. O'Brien, Esq. and his team have helped countless car accident victims. FREE consultations. 877.944.8396