UM/UIM Demand Letter - Alabama

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) POLICY LIMITS DEMAND

State of Alabama

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — ALABAMA RULES OF EVIDENCE 408 / FED. R. EVID. 408
FOR SETTLEMENT PURPOSES ONLY

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[UM_UIM_CLAIMS_DEPARTMENT_ADDRESS]
[________________________________]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]

Re: UM/UIM POLICY LIMITS DEMAND — ALABAMA LAW (Ala. Code § 32-7-23)

Dear [ADJUSTER_NAME]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [CLIENT_NAME] ("our client"), your insured, in connection with a claim for [UNINSURED / UNDERINSURED] motorist benefits under the above-referenced policy issued pursuant to Ala. Code § 32-7-23. This letter constitutes a formal demand for payment of the full available UM/UIM policy limits — including all stackable coverages permitted under Ala. Code § 32-7-23(c) — to compensate our client for damages arising from the motor vehicle collision of [__/__/____] in [COUNTY] County, Alabama.

Our client's damages substantially exceed both the tortfeasor's available liability limits and the UM/UIM limits afforded under the policy. Alabama's UM/UIM statute exists precisely to protect insureds in this situation, and Alabama law — as well as the policy itself — imposes on [CARRIER_SHORT_NAME] the duty to investigate this claim thoroughly, evaluate it honestly, and pay it promptly. See Davis v. Cotton States Mut. Ins. Co., 604 So. 2d 354 (Ala. 1992); Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981).

II. ALABAMA UM/UIM STATUTORY FRAMEWORK

A. Mandatory Offer and Minimum Limits — Ala. Code § 32-7-23

Alabama law requires every automobile liability insurance policy issued in this State to provide uninsured motorist coverage in limits at least equal to the statutory minimum established by Ala. Code § 32-7-6, currently $25,000 per person / $50,000 per accident for bodily injury and $25,000 for property damage, unless the named insured rejects such coverage in writing. Ala. Code § 32-7-23(a); Ala. Code § 27-14-11. Absent a valid written rejection, UM/UIM coverage is automatically included at the limits of the bodily injury liability coverage.

In Alabama, "underinsured motorist" coverage is a statutory component of uninsured motorist coverage. The tortfeasor qualifies as "underinsured" where the tortfeasor's available liability limits are insufficient to fully compensate the insured's damages. Ala. Code § 32-7-23(b).

B. Stacking Under Ala. Code § 32-7-23(c)

Alabama expressly authorizes intra-policy and inter-policy stacking subject to the statutory limit:

"The recovery by an injured person under the uninsured provisions of any one contract of automobile insurance shall be limited to the primary coverage plus such additional coverage as may be provided for additional vehicles, but not to exceed two additional coverages within such contract." Ala. Code § 32-7-23(c).

Under this provision, an injured insured may stack the primary UM/UIM coverage plus up to two additional coverages available on a single contract (covering multiple vehicles), for a total of three stackable coverages per policy. There is no cap on the number of separate policies that may be stacked, meaning an insured with multiple policies (e.g., resident relatives with their own auto policies) may be entitled to UM/UIM benefits under each. See, e.g., Ex parte Nationwide Mut. Ins. Co., 990 So. 2d 355 (Ala. 2008).

C. Coverage Trigger for This Claim

D. Coverage Inventory and Stacking Analysis

III. THE COLLISION AND TORTFEASOR LIABILITY

A. Facts of the Collision

On [__/__/____], at approximately [____] [AM/PM], our client was [DESCRIBE CLIENT ACTIVITY — e.g., "lawfully operating a 20[__] [MAKE/MODEL] northbound on U.S. Highway [___]"] at or near [LOCATION] in [CITY], [COUNTY] County, Alabama.

[DETAILED_NARRATIVE_OF_COLLISION — include direction of travel, signal/sign control, weather, road conditions, speeds, and impact sequence.]

[________________________________]

B. Tortfeasor's Negligence

The tortfeasor, [TORTFEASOR_NAME], breached the duty of reasonable care owed to our client under Alabama common law and the following Alabama Rules of the Road:

☐ Failure to yield right-of-way (Ala. Code § 32-5A-112 et seq.)
☐ Failure to keep a proper lookout
☐ Failure to maintain assured clear distance / following too closely (Ala. Code § 32-5A-89)
☐ Exceeding reasonable and prudent speed (Ala. Code § 32-5A-170)
☐ Running a red light / stop sign (Ala. Code § 32-5A-32, § 32-5A-112)
☐ Improper lane change (Ala. Code § 32-5A-88)
☐ Driving under the influence (Ala. Code § 32-5A-191)
☐ Distracted driving / texting while driving (Ala. Code § 32-5A-350)
☐ Reckless driving (Ala. Code § 32-5A-190)
☐ [OTHER: ________________________________]

C. Evidence of Liability

1. Alabama Uniform Traffic Crash Report issued by [AGENCY — e.g., Alabama Law Enforcement Agency / Birmingham Police Department / [COUNTY] County Sheriff's Office], Report No. [________], citing [TORTFEASOR] for [________].
2. Witness statements from [NUMBER] independent witnesses, including [WITNESS_1] and [WITNESS_2], all of whom corroborate the tortfeasor's fault.
3. Physical evidence — point of impact, debris field, vehicle damage patterns, and post-collision vehicle positions all consistent with our reconstruction.
4. Accident reconstruction by [EXPERT_NAME], [CREDENTIALS], whose report is enclosed.
5. [Tortfeasor's citation / guilty plea / criminal conviction, if applicable]

D. Our Client's Freedom From Contributory Fault

THIS IS CRITICAL UNDER ALABAMA LAW. Alabama is one of only four jurisdictions in the United States that retains the doctrine of pure contributory negligence: a plaintiff who is even 1% at fault is completely barred from recovery. See Williams v. Delta Int'l Mach. Corp., 619 So. 2d 1330 (Ala. 1993); Golden v. McCurry, 392 So. 2d 815 (Ala. 1980).

We have thoroughly investigated our client's conduct, and the evidence is uniform: our client bears zero comparative fault for this collision. Our client:

• Was operating [HIS/HER] vehicle within the posted speed limit;
• Had the right-of-way at the time of impact;
• Was not impaired, distracted, or violating any Rule of the Road;
• Was properly restrained by seatbelt;
• Had a valid Alabama driver license and operational vehicle.

Should [CARRIER_SHORT_NAME] contend otherwise, we will demand particularized factual support and pursue discovery on that issue, with full awareness that pretextual contributory-negligence defenses asserted without a reasonably legitimate basis can support a bad-faith-refusal-to-investigate claim under State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999).

IV. OUR CLIENT'S INJURIES AND MEDICAL TREATMENT

A. Injury Summary

As a direct and proximate result of the collision, our client sustained the following injuries:

Primary Injuries:
- [INJURY_1 — e.g., C5-C6 herniated disc with radiculopathy]
- [INJURY_2]
- [INJURY_3]

Secondary / Sequelae:
- [CONDITION_1]
- [CONDITION_2]

B. Treatment Timeline

C. Current Condition and Prognosis

[TREATING_PHYSICIAN], M.D., has rendered the following opinion to a reasonable degree of medical certainty: [OPINION_SUMMARY]. [CLIENT] has reached maximum medical improvement / continues in active treatment, and the anticipated future course is [DESCRIBE].

D. Permanent Impairment

Using the AMA Guides to the Evaluation of Permanent Impairment (6th ed.), [PHYSICIAN] has assigned the following impairment ratings:

V. DAMAGES

A. Past Medical Expenses (Alabama Collateral Source Rule)

Under Alabama's modified collateral source rule (Ala. Code § 12-21-45), evidence of payments from collateral sources is admissible, but the plaintiff may still recover the full reasonable value of medical services billed. Our client's billed medical expenses are itemized as follows:

B. Future Medical Expenses (Present Value)

C. Past and Future Lost Earnings / Earning Capacity

• Past Lost Wages: $[__________] ([NUMBER] weeks at $[RATE]/week)
• Future Lost Earning Capacity (PV): $[__________] per [ECONOMIST_NAME]'s report of [__/__/____]

D. Non-Economic Damages (Pain, Suffering, Mental Anguish, Loss of Enjoyment)

Alabama permits recovery for physical pain, mental anguish, disfigurement, and loss of the enjoyment of life. See Alabama Pattern Jury Instructions — Civil 11.01–11.09. [CLIENT]'s life has been substantially and permanently altered: [DESCRIBE IMPACT ON DAILY LIFE, HOBBIES, FAMILY, WORK].

E. Damages Summary

VI. LAMBERT CONSENT-TO-SETTLE PROCEDURE (Ala. 1991)

A. Status of Underlying Liability Settlement

Our client [HAS REACHED / IS IN NEGOTIATIONS REGARDING] a settlement with the tortfeasor's liability carrier, [TORTFEASOR_CARRIER], for policy limits of $[__________]. The tortfeasor's limits are grossly insufficient to compensate our client's damages of approximately $[__________].

B. Notice Under Lambert v. State Farm Mut. Auto. Ins. Co., 576 So. 2d 160 (Ala. 1991)

Pursuant to Lambert, our client hereby formally notifies [CARRIER_SHORT_NAME] of the tortfeasor's settlement offer and requests written consent to settle with the tortfeasor's liability carrier and execute a limited release of the tortfeasor.

Under Lambert, [CARRIER_SHORT_NAME] now has two options to preserve its subrogation rights against the tortfeasor:

1. Within a reasonable time, and in any event before the tortfeasor is released, advance to our client an amount equal to the tortfeasor's settlement ($[__________]), thereby preserving [CARRIER_SHORT_NAME]'s subrogation rights against the tortfeasor; or
2. Consent in writing to our client's settlement with the tortfeasor and waive subrogation.

We request a written response to this consent request within fourteen (14) days of receipt of this letter. A failure to timely respond, to advance the settlement amount, or to conduct a reasonable investigation will — under Lambert and its progeny — waive [CARRIER_SHORT_NAME]'s subrogation rights against the tortfeasor and [CARRIER_SHORT_NAME]'s liability carrier, and will be treated as consent.

VII. DEMAND FOR UM/UIM POLICY LIMITS

A. Calculation of Underinsured Damages

B. Policy Limits Demand

We hereby demand payment of the full UM/UIM policy limits totaling $[__________], consisting of:

• Primary UM/UIM coverage: $[__________]
• Stacked additional vehicle coverage (per Ala. Code § 32-7-23(c)): $[__________]

Our client's compensable damages of $[__________] dramatically exceed the available stacked coverage. Under any reasonable evaluation of this claim, it is a textbook policy limits case. Tender of less than full limits will be rejected.

VIII. BAD FAITH WARNING — ALABAMA STANDARD

A. Alabama's Recognition of First-Party Bad Faith

Alabama was the first state in the Southeast to recognize first-party insurance bad faith as a tort, adopting the cause of action in Chavers v. National Security Fire & Casualty Co., 405 So. 2d 1 (Ala. 1981). The Chavers elements, as restated in National Security Fire & Casualty Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982), require the insured to prove:

(a) An insurance contract between the parties and a breach thereof by the defendant;
(b) An intentional refusal to pay the insured's claim;
(c) The absence of any reasonably legitimate or arguable reason for that refusal;
(d) The insurer's actual knowledge of the absence of any legitimate or arguable reason;
(e) If the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer's intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.

B. Single Tort With Two Methods of Proof — Brechbill (2013)

In State Farm Fire & Casualty Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013), the Alabama Supreme Court clarified that there is one tort of bad faith with two methods of proof:

1. Bad-faith refusal to pay ("normal" case): the plaintiff would be entitled to a directed verdict on the underlying contract claim because the insurer has no arguable reason to deny coverage.
2. Bad-faith refusal to investigate ("abnormal" case): even if the insurer ultimately had an arguable basis, the plaintiff may recover upon showing that the insurer (i) intentionally or recklessly failed to investigate the claim; (ii) intentionally or recklessly failed to subject the claim to a cognitive evaluation or review; (iii) created its own debatable reason for denial; or (iv) relied on an ambiguous portion of the policy as a lawful basis to deny.

See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 306–07 (Ala. 1999) (setting out the four-category abnormal bad faith framework); Davis v. Cotton States Mut. Ins. Co., 604 So. 2d 354 (Ala. 1992) (UM bad faith).

C. Available Remedies Under Alabama Bad Faith Law

Upon proof of bad faith, Alabama courts permit recovery of:

• Compensatory damages in excess of policy limits;
• Mental anguish damages (Alabama broadly allows mental anguish in bad faith cases — see Aetna Life Ins. Co. v. Lavoie, 470 So. 2d 1060 (Ala. 1984));
• Punitive damages upon clear and convincing evidence of oppression, fraud, wantonness, or malice (Ala. Code § 6-11-20);
• Subject to the punitive damages cap of Ala. Code § 6-11-21 — the greater of $1.5 million or 3× compensatory damages in cases involving physical injury, and the greater of $500,000 or 3× compensatory damages in other cases.

See Acceptance Ins. Co. v. Brown, 832 So. 2d 1 (Ala. 2001) ($1.2 million punitive award on bad faith affirmed in duty-to-defend context).

D. Notice of Bad Faith Exposure

Any refusal to pay the UM/UIM limits, any offer substantially below the compensatory value of this claim, or any failure to promptly conduct a reasonable investigation — including medical record review, IME (if warranted), and liability verification — will expose [CARRIER_SHORT_NAME] to a bad faith action under the Chavers/Bowen/Brechbill framework. This letter serves as formal notice of that exposure.

IX. ALABAMA UNFAIR TRADE PRACTICES — REGULATORY (NOT PRIVATE)

[CARRIER_SHORT_NAME] is reminded that its conduct is also subject to Ala. Code § 27-12-1 et seq. (Alabama Trade Practices Law) and the claim-handling standards adopted by the Alabama Department of Insurance pursuant to Ala. Code § 27-12-24. While Alabama does not recognize a private cause of action for violations of § 27-12-24, violations are enforceable by the Commissioner and may be offered as evidence of bad faith and as a basis for a regulatory complaint. Improper conduct includes:

• Misrepresenting pertinent facts or policy provisions;
• Failing to acknowledge and act reasonably promptly on communications;
• Failing to adopt and implement reasonable standards for prompt claim investigation;
• Not attempting in good faith to effectuate prompt, fair, and equitable settlements where liability is reasonably clear;
• Compelling insureds to institute litigation by offering substantially less than the amounts ultimately recovered.

X. POLICY ARBITRATION PROVISION (IF APPLICABLE)

If the subject policy contains a UM/UIM arbitration clause, this letter also constitutes notice of intent to invoke arbitration in the event tender of policy limits is not made by the response deadline. Our client reserves all rights to contest the enforceability of any such clause under Alabama law, including to the extent it conflicts with our client's right to a jury trial under Article I, § 11 of the Alabama Constitution.

XI. RESPONSE DEADLINE AND CONSEQUENCES

THIS DEMAND EXPIRES AT 5:00 P.M. CENTRAL TIME ON [__/__/____].

If [CARRIER_SHORT_NAME] fails to tender the full policy limits, provide written consent to settle under Lambert, or advance the tortfeasor settlement amount by the deadline, our client will:

☐ File suit in the Circuit Court of [COUNTY] County, Alabama, asserting claims for breach of contract and bad faith refusal to pay/investigate;
☐ Seek compensatory damages, mental anguish damages, and punitive damages under Ala. Code § 6-11-20/21;
☐ Invoke policy arbitration provisions (if applicable);
☐ File a complaint with the Alabama Department of Insurance, Consumer Services Division, P.O. Box 303351, Montgomery, AL 36130-3351 (334-241-4141);
☐ Pursue all available discovery on claim handling, reserves, and supervisor reviews.

Alabama's two-year statute of limitations for personal injury (Ala. Code § 6-2-38(l)) and six-year statute for UM/UIM contract claims (Ala. Code § 6-2-34) are calendared.

XII. DOCUMENT PRESERVATION NOTICE

This letter serves as formal notice to preserve all documents and electronically stored information related to this claim, including the complete claim file (both paper and electronic), all adjuster diaries, activity logs, reserve history and reserve change documentation, supervisor notes, internal emails, roundtable/committee review notes, claim handling manuals and training materials applicable to UM/UIM claims in Alabama, all communications with the insured, tortfeasor's carrier and any experts, and all medical records, photographs, and recorded statements.

XIII. CONCLUSION

This claim presents clear tortfeasor liability, catastrophic injuries, severe economic loss, and damages dramatically exceeding coverage. Our client has fulfilled every obligation under the policy. [CARRIER_SHORT_NAME] now has the opportunity — and the duty under Alabama law — to promptly pay policy limits to its own insured.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME], Alabama State Bar No. [________]
[ADDRESS]
[CITY], Alabama [ZIP]
Telephone: [________]
Email: [________]

Counsel for [CLIENT_NAME]

ENCLOSURES:

☐ Alabama Uniform Traffic Crash Report
☐ Policy declarations page and UM/UIM endorsement
☐ Medical records and itemized bills
☐ Photographs of vehicles and scene
☐ Tortfeasor's liability limits disclosure
☐ Accident reconstruction report (if applicable)
☐ Employment / lost wage verification
☐ Life care plan / economic loss report (if applicable)

CC:

☐ [CLIENT_NAME]
☐ [TORTFEASOR_CARRIER] (re: Lambert consent)

ALABAMA UM/UIM LAW QUICK REFERENCE

SOURCES AND REFERENCES

• Ala. Code § 32-7-23 (Uninsured Motorist Coverage) — https://law.justia.com/codes/alabama/title-32/chapter-7/section-32-7-23/
• Ala. Code § 6-11-21 (Punitive Damages Cap) — https://law.justia.com/codes/alabama/title-6/chapter-11/article-2/section-6-11-21/
• Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981)
• Nat'l Sec. Fire & Cas. Co. v. Bowen, 417 So. 2d 179 (Ala. 1982)
• Lambert v. State Farm Mut. Auto. Ins. Co., 576 So. 2d 160 (Ala. 1991)
• Davis v. Cotton States Mut. Ins. Co., 604 So. 2d 354 (Ala. 1992)
• State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999)
• State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013)
• Acceptance Ins. Co. v. Brown, 832 So. 2d 1 (Ala. 2001)
• Aetna Life Ins. Co. v. Lavoie, 470 So. 2d 1060 (Ala. 1984)
• Alabama Department of Insurance — https://aldoi.gov/

DISCLAIMER: This template is for informational purposes only and does not constitute legal advice. It must be reviewed and customized by an attorney licensed in the State of Alabama before use. Alabama's pure contributory negligence doctrine, statute of limitations, and specific policy language fundamentally affect UM/UIM claim evaluation and strategy.