Auto insurance companies have a laundry list of ways to limit or circumvent liability for claims in major accidents. One of the most notorious methods is a “step-down provision.”
Applicable in a range of circumstances, the step-down provision holds that, under certain conditions, the insurer will only cover the statutory minimum required by law, as opposed to the liability limit for which the insured actually paid. One type of step-down provision is the family step-down provision. It holds that if one of the injured parties is a family or household member of the at-fault party, the insurance coverage will “step down” to the statutory minimum.
Our Boston car accident lawyers understand that while insurers have successfully asserted this clause in crash cases across the country, a number of state supreme courts and legislators have stepped in to find such clauses contrary to public policy. That means the greater public good is harmed by enforcement of such a provision.
Recently, South Carolina joined the ranks of states standing up to insurers on this issue, with the state supreme court ruling in Williams v. GEICO. The insurance company in this case attempted to stretch the family step-down provision to the at-fault driver’s wife (as a family member), despite the fact that she was also a named insured.
According to court records, the husband and wife purchased an auto insurance policy in which they were covered for up to $100,000 in liability for a crash. The state’s statutory minimum amount of crash coverage is $15,000.
Soon after signing the policy, the couple was killed in a collision with a train. Investigators were unable to determine who was driving, but for insurance purposes, it shouldn’t have mattered, as both were equally covered under the policy.
Individual estates were established by family members of the husband and wife and personal representatives from each estate sought to collect $100,000 total from the auto insurance company. However, the insurer pointed to the family step-down provision and insisted only $15,000 would be paid.
A court battle ensued. The trial court ruled in favor of the insurer, a decision later upheld by the appellate court. However, those findings were reversed by the state supreme court.
Although the high court rejected plaintiff’s assertion that the insurance policy was ambiguous, justices did find the policy to be contrary to public policy. As a general rule, insurance companies have the right to limit their liability by imposing conditions on their pay-out obligations. However, these limitations cannot be manifestly injurious to public welfare.
In this case, the high court noted past case law indicating every policy issued needs to insure the named insured and permissive users against liability, and that no policy provision is allowed to limit or reduce coverage under this requirement.
Although there has been broad interpretation by the courts on this issue, the South Carolina Supreme Court leaned heavily on the reasoning of the Kentucky Supreme Court in Lewis v. West American Insurance Co., a 1996 case. Family exclusions, the court ruled, were harmful to a large segment of the population. Such provisions unfairly deny injured parties the chance to rely on insurance coverage to which they would otherwise rightfully be entitled were it not for familial relationship to the insured.
Our attorneys are committed to fighting to ensure our clients receive their fair share of insurance pay-outs to compensate for medical bills, lost wages and other expenses.
If you are injured in an accident in Massachusetts, call the Law Offices of Jeffrey S. Glassman for a free and confidential appointment — (617) 777-7777.
Williams v. GEICO, Aug. 20, 2014, South Carolina Supreme Court
More Blog Entries:
Progressive Casualty Insurance Co. v. MMG Insurance Co.: UIM Coverage and A Single Vehicle Crash, Aug. 16, 2014, Boston Car Accident Lawyer Blog