PCI: Ill. UIM Bill Would Skew Law to Encourage ‘Stacking’

An Illinois Senate bill that would change the recovery system for underinsured drivers’ (UIM) coverage is strongly opposed by the insurance industry because of its reported potential to allow the “stacking” of policy limits.

S.B. 2830, which is currently in the House Committee on Rules, would change Illinois Insurance Code language on recovery from “difference in limits” to a “modified difference in limits.”

“The bill could create a situation where insurers lose their ability to interpret one sentence as a reducing clause and it may allow for stacking of policy limits,” said Laura Kotelman, regional manager and senior counsel for the Property Casualty Insurers Association of America (PCI). “Stacking” refers to the process of combining uninsured/underinsured coverage limits.

If the current language is removed, the underinsured carrier could have to pay beyond the difference between the limits of the two coverages depending on how much they actually recover, according to Kotelman.

“The bill could encourage the practice of stacking to the detriment of UIM insurers, and would do nothing to encourage the stability of the Illinois insurance marketplace,” added Kotelman.

Another bill, H.B. 5026, passed the House Insurance Committee last week.

It provides that an automobile insurance policy providing for uninsured motor vehicle coverage (UM) and underinsured motor vehicle coverage (UIM) must treat UIM as part of UM coverage. This is an industry initiative to deal with recent court decisions that split the treatment of UM and UIM in Illinois.