October 2, 2023

When and How to Commence Arbitration in an Uninsured or Underinsured Motorist Claim

In a perfect world, every defendant to an automobile injury claim would have deep pockets and a generous automobile insurer. Sadly, this isn’t the case, so what to do when you were, say, hit by a car when the negligent driver was not insured? Or what if the driver simply hit your car and drove away? In these scenarios, a person injured in an automobile accident will often seek reimbursement from their own insurance company, with what is known as “uninsured” or “underinsured motorist benefits.” Often times, an attorney will demand such payment by letter. In that case, it is important to know when and how to notify your insurer of such a claim.

The 1st District Appellate Court was recently confronted with the question of what actions a claimant must take against to commence arbitration, in Rein v. State Farm, 407 Ill.App.3d 969 (1st Dist. 2011). In this case, the plaintiff was injured in a hit and run accident. Because the driver was never identified, the plaintiff sought recovery in the manner described above from her own insurer, State Farm. The plaintiff’s attorney sent a letter notifying State Farm of her claim for uninsured motorist benefits nearly two years after the accident. The letter stated, in part, “You are hereby notified that it is our intention to pursue an Uninsured/Underinsured Motorist Claim against State Farm Insurance under the above-captioned policy…”

The applicable policy required that any arbitration or suit seeking such benefits would be barred unless it commenced within two years of the date of accident. It also stated that, if the claimant requested arbitration, it must select an arbitrator as well. However, the policy wasn’t clear as to whether a mere letter was sufficient to “commence arbitration or suit.”

The lower court ruled that it was not and dismissed plaintiff’s action and found that the “claim notice” letter sent by plaintiff’s attorney was insufficient to “commence arbitration,” as required by the applicable policy. The decision was affirmed on appeal, although the 5th District reached a different conclusion under similar circumstances. Had the 1st District been free to apply similar logic, the plaintiff may have succeeded in her claim. However, the legal principle of stare decisis binds each circuit court to the decisions and precedents within its own district.

This outcome only underscores the importance of abiding by statutes of limitations and other claim deadlines, which will certainly be upheld in court. The deadline itself may depend on your particular insurance policy. Avoid the risk of missing such deadlines by consulting with an attorney immediately after you have suffered an injury.

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