In an unusual Underinsured Motorist claim the Named Insured, her sister, and her three-year-old son, were all injured in an accident with a motorist who had insufficient liability insurance coverage applicable to the claims. The Named Insured was severely injured, although her two passengers, her son and her sister, sustained only minor injuries. Both, however, suffered emotional distress from having witnessed the injuries to the Named Insured. The child had physical manifestations, including mental concentration problems and sleeping disorder, but her sister had no physical manifestations of her emotional distress.

The question before the state court was whether an emotional injury from witnessing the accident and severe injury to another was a derivative claim of the severely injured person, or constituted a separate claim, triggering the "per person" applicability of the policy's "split limits" (each person/each accident). As the coverage amount available for each person was limited, if the emotional distress claims were found to be derivative rather than individually applicable, the difference would be thousands of dollars. The insurer argued that the sister's claim was derivative, limiting her claim to the maximum "each person" limit, shared with the Named Insured. The insurer believed that both passengers' emotional distress claims were limited to a single "each person" as the distress was "a result of" the Named Insured's injuries, not separate injuries. The trial court agreed.

On appeal, the appellate court reviewed all of the policy language. It found that the emotional distress was not a "result" of the Named Insured's injury, but constituted separate injuries, thus triggering additional "each person" applicability, with the "each accident" constituting only a maximum of the three separate claims.

The general example above illustrates the point that understanding the claims implications of the law can be difficult and wrong decisions can lead to expensive litigation. Crawford Educational Services offers courses that help your adjusters understand and resolve the claims issues in coverage, liability and damages. For complete course listings, visit our website.