UIM/UM Coverage: How $20,000 in Coverage Became $350,000 in Coverage

Our client was seriously injured by a driver who had no insurance. Unfortunatly, there are far too many drivers on the road with either the state minimum coverage of $25,000 or no insurance at all. When the at‑fault driver has no coverage, the next place to look is your own policy — your uninsured and underinsured motorist coverage. So we called our client’s insurer. The answer came back quickly: $20,000. The statutory minimum. That would have been the end of the case with many lawyers

We did not accept that answer.

Our client had bought $350,000 in bodily injury liability coverage. He was a professional driver and he needed to have higher limits for his job. There was no reason his uninsured motorist coverage should be a fraction of that, and in Illinois there is a statute that says so. Section 143a‑2 of the Illinois Insurance Code requires uninsured and underinsured motorist coverage to equal the bodily injury liability limits unless the coverage is properly rejected.

So we filed suit and issued a subpoena for the insurance agent’s file. Not the policy — the application.

What the file showed

The application our client signed contained no rejection of the higher limits. None.

The insurer did have a rejection form. It was signed on January 21, 1997 — three weeks after the policy had already been issued on December 31, 1996.

Under the statute as it then read, that was not a technicality. The law required the rejection to be signed or initialed by the applicant, on the application. Our client was not an applicant on January 21. He was already insured. The company had issued his policy, taken his premium, and only afterward gone back to collect a signature that would have cut his coverage by more than 94%. And note that this was not a fly by night insurance company, it was a well-respected hightly rated company

The insurance company refused to recognize its mistake and insisted our client only had $20,000 in coverage. We knew that was wrong and filed a suit in Kane County called a declaratory judgment. We argued that as a matter of law, our client was entitled to UM/UIM limits equal to the liablity limits.

The trial court agreed. So did the Appellate Court

The trial judge found in our client’s favor and the insurance company appealed. The Illinois Appellate Court, Second District, affirmed. Wood v. National Liability & Fire Insurance Co., 324 Ill. App. 3d 583 (2d Dist. 2001). The court held that the legislature intended the application process to cease once a policy is issued, and that our client was no longer an applicant on the day the insurer obtained his signature. It concluded:

The court also rejected the insurer’s attempt to blame its own agent, holding that the responsibility for obtaining a timely rejection rested with the insurance company.

Following the appellate court’s decision, our client was paid the full $350,000 policy limits.

What happened after the Appellate Ruling

The following year, the First District of the Appellate Court confronted the same question in Lee v. John Deere Insurance Co., 334 Ill. App. 3d 807 (1st Dist. 2002) — and refused to follow Wood, calling it “contrary to the plain language” of the statute and rejecting it “as a matter of law.”

The Illinois Supreme Court disagreed. In Lee v. John Deere Insurance Co., 208 Ill.2d 38 (2003), the court reversed the First District and adopted Wood’s reasoning by name, quoting our case for the proposition that “the legislature intended the application process to cease once an insurance policy is issued.” The court also confirmed that uninsured and underinsured coverage are “inextricably linked” in the statute — so a defective rejection of one carries consequences for the other.

Then the legislature changed the statute

Public Act 93‑762, effective July 16, 2004 — roughly seven months after Lee — rewrote the rejection procedure. The statute no longer requires that an application contain a space for indicating rejection, and no longer conditions a rejection on the applicant signing or initialing it. The current provision says that “any named insured or applicant” may reject the additional coverage by written request or written rejection.

The amended statute still commands that coverage equal to the bodily injury limits be included when a policy is issued, delivered, or renewed unless it has been rejected. So if no rejection exists on the day the policy issues, an argument remains that the coverage attached at that moment, and that a rejection signed weeks later cannot reach backward to undo it. As far as we have been able to determine, no Illinois reviewing court has decided that question under the current statute. It is open, and in a case where the loss falls between the issuance date and the late signature, it would decide the case.

What has not changed

The core rule survives intact: absent a valid rejection, uninsured motorist coverage equals your bodily injury liability limits by operation of law, and underinsured coverage follows where uninsured coverage exceeds the statutory minimum.

The Fifth District applied that rule under the current statute in Worley v. Fender, 2017 IL App (5th) 160110, reforming underinsured motorist limits from $40,000 up to the policy’s $1 million bodily injury liability limits because no one authorized by the insured had ever made a written rejection. The paperwork requirements changed. The premise did not.

A warning about your own policy

There is a feature of this statute that costs Illinois drivers real money every year, quietly.

An election to take less uninsured motorist coverage than your liability limits does not expire. The statute provides that where an insured has elected reduced limits, the insurer “need not provide in any renewal, reinstatement, reissuance, substitute, amended, replacement or supplementary policy, coverage in excess of that elected” — unless the insured later makes a written request for more.

Read that carefully. A decision made once, years ago, at a kitchen table or over the phone with an agent, carries forward through every renewal for as long as you stay with that company. Nobody re-asks you. Your liability limits may have gone up three times since. Your uninsured motorist coverage did not follow them up.

People discover this after a crash, which is the worst possible moment. So:

• Pull out your declarations page.
• Compare your bodily injury liability limits to your uninsured and underinsured motorist limits.
• If the uninsured figure is lower, somebody once signed something. You can change it — but only by putting the request in writing to your insurer.

This is among the cheapest coverage you can buy, and it is the only coverage that protects you from the drivers least likely to be able to pay for what they do to you.