UM/UIM Demand Letter - Illinois

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) DEMAND LETTER

State of Illinois

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
SETTLEMENT COMMUNICATION — INADMISSIBLE UNDER ILL. R. EVID. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
Article No.: [____________________________]
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE COMPANY FULL LEGAL NAME]
[________________________________]
[________________________________]
[CITY], IL [ZIP]

Attention: [________________________________], Claims Representative
Claim Number: [________________________________]
Policy Number: [________________________________]
Named Insured: [________________________________]
Claimant: [________________________________]
Date of Loss: [__/__/____]
Type of Claim: ☐ Uninsured Motorist (UM) ☐ Underinsured Motorist (UIM)
UM/UIM Limits: $[________________] per person / $[________________] per accident
Tortfeasor's Carrier: [________________________________]
Tortfeasor's Liability Limits: $[________________] / $[________________]
Response Deadline: [__/__/____] at 5:00 p.m. Central Time

Dear [________________________________]:

I. INTRODUCTION AND DEMAND

This office represents [________________________________] ("our client") with respect to a claim for uninsured/underinsured motorist benefits arising out of a motor vehicle collision that occurred on [__/__/____] at or near [________________________________], [________________________________] County, Illinois.

Pursuant to the motor vehicle insurance policy issued by [________________________________] ("the Company"), Policy No. [________________________________] ("the Policy"), and the mandatory provisions of 215 ILCS 5/143a and 215 ILCS 5/143a-2, our client is entitled to payment of UM/UIM benefits. This letter constitutes a formal demand for payment of the full applicable UM/UIM policy limits of $[________________________________].

Our client's total damages substantially exceed all available coverage. This is a policy-limits case. We urge the Company to resolve this claim promptly to avoid the additional remedies available under Illinois law, including the vexatious-delay penalty under 215 ILCS 5/155.

II. ILLINOIS UM/UIM LAW — GOVERNING STATUTORY FRAMEWORK

A. Mandatory UM/UIM Coverage Under 215 ILCS 5/143a

Under 215 ILCS 5/143a, every automobile liability insurance policy delivered or issued for delivery in Illinois covering a private passenger motor vehicle must include uninsured motorist (UM) coverage at minimum limits of $25,000 per person / $50,000 per accident, consistent with the financial responsibility minimums established at 625 ILCS 5/7-203.

The Company is required to offer UM/UIM coverage equal to the bodily injury liability limits of the policy. Any rejection or reduction of UM/UIM coverage below those limits must be in writing, signed by the named insured, and attached to the policy.

B. Underinsured Motorist Coverage Under 215 ILCS 5/143a-2

215 ILCS 5/143a-2 governs UIM coverage in Illinois. The statute defines an "underinsured motor vehicle" as one for which the sum of the limits of liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of underinsured motorist coverage provided under the insured's policy.

Critical Illinois-Specific Setoff Rule: Under 215 ILCS 5/143a-2(4), the UIM insurer's liability is limited to the UIM policy limits less the amounts actually recovered under the applicable bodily injury insurance policies maintained on the underinsured vehicle. The Illinois Appellate Court has confirmed that an insurer may only offset amounts paid by the tortfeasor's own liability insurer — not amounts paid by other sources. Farmers Automobile Insurance Association v. Coulson, 402 Ill. App. 3d 779 (5th Dist. 2010).

C. Exhaustion Requirement

Before UIM benefits are triggered, our client must exhaust — or be in the process of exhausting — the tortfeasor's applicable liability insurance limits. We have [☐ already tendered / ☐ provided notice of intent to tender] a demand for the tortfeasor's policy limits of $[________________] to [________________________________].

D. Anti-Stacking and Stacking Analysis

Illinois policies frequently include anti-stacking provisions. The enforceability of such provisions turns on whether the anti-stacking language is clear and unambiguous; ambiguous language is construed against the insurer and in favor of coverage. The Policy [☐ contains / ☐ does not contain] an anti-stacking provision. We assert that [________________________________].

Number of vehicles on this Policy: [____]
Stacked UIM limit claimed (if applicable): $[________________]

E. Consent-to-Settle Requirement

Under the Policy and Illinois law, our client [☐ has obtained / ☐ hereby requests] the Company's written consent to settle with the tortfeasor's liability carrier for the tortfeasor's policy limits of $[________________]. Failure to respond to this consent request within a reasonable time may constitute a waiver of subrogation rights and expose the Company to liability for any damages flowing from its unreasonable refusal.

Please confirm consent to settle in writing within [____] days of this letter.

F. Arbitration Under Illinois Law

The Policy [☐ requires / ☐ does not require] arbitration of UM/UIM disputes. Illinois courts have enforced two-year contractual arbitration limitation periods in UM/UIM policies. See ISBA, Liability Minute (Apr. 25, 2013). If arbitration is required, the American Arbitration Association (AAA) Government UM/UIM Rules govern the proceeding unless the parties agree otherwise, and arbitrators may authorize pre-hearing discovery. If this demand is rejected, we will invoke arbitration within the contractual period.

G. Statute of Limitations

Our client's UM/UIM claim is governed by the 5-year contract statute of limitations under 735 ILCS 5/13-205, subject to any shorter contractual limitations period in the Policy. Our client's right to recover accrued on [__/__/____]. The contractual limitation period, if any, is [________________________________]. We are filing this demand well within any applicable period.

III. FACTUAL BACKGROUND

A. The Collision

On [__/__/____], at approximately [____] [☐ a.m. / ☐ p.m.], our client, [________________________________], was operating/occupying a [________________________________] traveling [________________________________] on [________________________________] in [________________________________], [________________________________] County, Illinois. At that time and place, [________________________________] (the "tortfeasor"), operating a [________________________________], [DESCRIBE COLLISION: ________________________________].

B. Police Report and Investigation

The collision was investigated by [________________________________] (Badge/Report No. [________________________________]). The responding officer documented [________________________________]. A copy of the Illinois Traffic Crash Report (SR 1050) is attached as Exhibit A.

C. Tortfeasor's Negligence

The tortfeasor's conduct constituted negligence under Illinois law, including but not limited to:

☐ Failure to yield the right-of-way (625 ILCS 5/11-901 et seq.)
☐ Improper lane usage (625 ILCS 5/11-709)
☐ Following too closely (625 ILCS 5/11-710)
☐ Disobeying a traffic control device (625 ILCS 5/11-201)
☐ Operating under the influence of alcohol/drugs (625 ILCS 5/11-501)
☐ Failure to reduce speed to avoid accident (625 ILCS 5/11-601)
☐ Distracted driving (625 ILCS 5/12-610.2)
☐ [________________________________]

D. Basis for UM/UIM Trigger

☐ Uninsured Motorist: The tortfeasor had no liability insurance in force at the time of the collision, confirmed by [________________________________]. The tortfeasor qualifies as an "uninsured motorist" under 215 ILCS 5/143a.

☐ Uninsured Motorist (Hit-and-Run): The tortfeasor was an unidentified hit-and-run driver. Our client made physical contact with the unidentified vehicle and promptly reported the collision to law enforcement (Report No. [________________________________]) and to the Company.

☐ Uninsured Motorist (Insolvent Insurer): The tortfeasor's insurer, [________________________________], has been declared insolvent / denied coverage, rendering the vehicle effectively uninsured.

☐ Underinsured Motorist: The tortfeasor's liability limits of $[________________] / $[________________] are insufficient to fully compensate our client's damages of $[________________]. Our client's UIM limits of $[________________] exceed the tortfeasor's limits, triggering UIM coverage under 215 ILCS 5/143a-2.

E. Our Client's Freedom From Comparative Fault

Our client was not negligent. Under Illinois's modified comparative fault rule (735 ILCS 5/2-1116), a plaintiff who is more than 50% at fault may not recover. Our client bears zero comparative fault for this collision, as confirmed by the police report and the physical evidence.

IV. OUR CLIENT'S INJURIES AND MEDICAL TREATMENT

A. Nature and Extent of Injuries

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

B. Treatment Chronology

C. Current Condition and Prognosis

[________________________________] remains under the care of [________________________________]. As of [__/__/____], our client's treating physicians have opined that [________________________________]. Our client [☐ has reached / ☐ has not yet reached] maximum medical improvement.

D. Permanent Impairment

Pursuant to the AMA Guides (6th Ed.), [________________________________] has been assessed with a [____]% whole-person permanent impairment, as detailed in the attached report of [________________________________], M.D. (Exhibit [____]).

E. Future Medical Needs

Our client will require the following future medical care and treatment:

V. ITEMIZATION OF DAMAGES

A. Medical Expenses

Past Medical Expenses:

Future Medical Expenses (Present Value):

$[____________]

B. Lost Income and Earning Capacity

Past Lost Wages:
Our client was employed as [________________________________] earning $[____________] per [☐ hour / ☐ week / ☐ year]. Our client was disabled from [__/__/____] through [__/__/____], a period of [____] [☐ days / ☐ weeks / ☐ months], resulting in lost wages of $[____________].

Future Lost Earning Capacity (Present Value):
As a result of permanent injuries, our client's earning capacity has been diminished. Vocational expert [________________________________] opines that our client has sustained a loss of future earning capacity of $[____________] (present value).

C. Non-Economic Damages

Illinois does not cap non-economic damages in personal injury cases arising from motor vehicle collisions. (Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217 (2010), struck down the MICRA cap; no general cap applicable here.) Our client's pain, suffering, disfigurement, and loss of a normal life are substantial:

[________________________________]

Estimated non-economic damages: $[____________]

D. Damages Summary

VI. SETOFF ANALYSIS AND UIM CALCULATION

Under 215 ILCS 5/143a-2, UIM benefits are calculated as follows:

Note: Pursuant to Farmers Automobile Insurance Association v. Coulson, 402 Ill. App. 3d 779 (5th Dist. 2010), the Company may not offset amounts paid by parties other than the tortfeasor's own liability insurer. Any broader setoff provision in the Policy is unenforceable under Illinois public policy.

VII. POLICY LIMITS DEMAND

We hereby demand payment of the full UM/UIM policy limits of $[________________________________].

Our client's damages of $[________________________________] substantially exceed all available coverage. Payment of policy limits is the appropriate response to a clear policy-limits case. The Company's obligation to its own insured demands nothing less.

VIII. BAD FAITH WARNING — 215 ILCS 5/155

The Company owes its own insured the duties of good faith and fair dealing. Illinois provides a statutory remedy — not a common law tort — for insurers who engage in vexatious and unreasonable conduct under 215 ILCS 5/155.

A. Governing Standard

The Illinois Supreme Court held in Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 675 N.E.2d 897 (1996), that Section 155 "provides an extracontractual remedy to policyholders whose insurer's refusal to recognize liability and pay a claim under a policy is vexatious and unreasonable." Courts examine the totality of the circumstances, including the insurer's attitude, to determine whether the conduct crosses the threshold.

An insurer cannot escape Section 155 liability merely because it raises a legitimate legal question; where the weight of authority and the facts clearly support the claim, stonewalling or lowballing is vexatious. See Illinois courts applying Section 155 in UM/UIM delay cases.

B. Penalties Available Under 215 ILCS 5/155

If the Company's conduct is found to be vexatious and unreasonable, the court shall award:

1. Reasonable attorney fees incurred by the insured; plus
2. All litigation costs; plus
3. The lesser of the following penalty amounts:
   - (a) 60% of the amount the court or jury finds due to the insured (exclusive of costs); or
   - (b) $60,000; or
   - (c) The excess of the amount found due over the Company's last settlement offer prior to filing.

Important: The $60,000 cap under subsection (b) is a flat maximum per action, not a per-annum figure. Combined with attorney fees that may equal or exceed the policy benefits in protracted litigation, the total exposure for vexatious conduct is substantial.

C. Conduct That Will Trigger Section 155 Liability

Any of the following in this matter would constitute actionable vexatious conduct:

☐ Denying UM/UIM benefits without a reasonable basis grounded in the policy or Illinois law
☐ Offering an amount dramatically below the documented damages without credible supporting analysis
☐ Delaying acknowledgment of this claim beyond 15 working days (Ill. Admin. Code tit. 50, § 919.50)
☐ Failing to pay undisputed UIM benefits within 30 days of liability determination (Ill. Admin. Code tit. 50, § 919.50)
☐ Conducting an unreasonable or pretextual investigation designed to justify denial
☐ Misrepresenting the policy language, applicable statutes, or legal standards
☐ Refusing consent to settle the tortfeasor's claim without reasonable justification

IX. CONSENT TO SETTLE AND PRESERVATION OF SUBROGATION

We hereby provide the Company with formal written notice that our client intends to accept a settlement from the tortfeasor's liability carrier, [________________________________], in the amount of $[________________________________] (the tortfeasor's full policy limits).

Please confirm the Company's written consent within [____] days.

Under Illinois law, if the Company refuses consent without reasonable grounds and thereby forces our client to forgo available liability proceeds, the Company may lose its subrogation rights and may be estopped from asserting a setoff for amounts our client could not recover. The Company should exercise its subrogation rights — if any — promptly and in good faith.

X. REGULATORY AND ARBITRATION NOTICE

A. Illinois Department of Insurance

If this matter is not resolved, we will file a formal complaint with the Illinois Department of Insurance, Consumer Division, 320 W. Washington Street, Springfield, IL 62767; Telephone: (217) 782-4515; Website: insurance.illinois.gov. The IDOI has authority under 215 ILCS 5/154.6 and Ill. Admin. Code tit. 50, pt. 919 to investigate and sanction insurers for improper claims practices.

B. Arbitration Notice

If the Policy requires arbitration and this demand is not accepted by the deadline, this letter shall serve as notice of our intent to invoke the arbitration process under the Policy and the AAA Government UM/UIM Rules. We will adhere to all contractual notice requirements to preserve our client's rights.

XI. RESPONSE DEADLINE AND CONSEQUENCES

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

The Company must, by that deadline:

1. Tender the full UM/UIM policy limits of $[________________________________]; or
2. Provide a written counter-offer with a complete explanation of the Company's valuation, supported by specific evidence and legal authority.

If the Company fails to respond, offers a grossly inadequate amount, or issues a denial without reasonable justification, our client will:

1. File suit in the Circuit Court of [________________________________] County, Illinois, or in the United States District Court for the [________________________________] District of Illinois, asserting:
   - Breach of contract (UM/UIM policy)
   - Vexatious and unreasonable delay under 215 ILCS 5/155 (attorney fees + 60% / $60,000 penalty)
   - Declaratory judgment

2. Invoke arbitration under the Policy (if required) and seek all available AAA remedies

3. File a consumer complaint with the Illinois Department of Insurance

4. Seek all remedies available under 215 ILCS 5/154.6 and Ill. Admin. Code tit. 50, pt. 919

XII. CONCLUSION

This letter presents a clear, well-documented demand for UM/UIM benefits owed to the Company's own insured under Illinois law. The facts establish liability, the injuries are severe and well-documented, and the damages substantially exceed available coverage. The Company has the opportunity to fulfill its contractual obligations to its insured by tendering the policy limits.

Please govern yourself accordingly.

Respectfully submitted,

[________________________________]

By: ___________________________________
[________________________________], Esq.
ARDC No.: [________________________________]
[________________________________]
[________________________________], IL [________]
Tel.: ([____]) [____]-[________]
Fax: ([____]) [____]-[________]
Email: [________________________________]

Counsel for [________________________________]

ENCLOSURES:

☐ Exhibit A — Illinois Traffic Crash Report (SR 1050), Report No. [________________]
☐ Exhibit B — Policy Declarations Page and UM/UIM Endorsement
☐ Exhibit C — Medical Records (chronological)
☐ Exhibit D — Medical Bills / Itemized Charges
☐ Exhibit E — Photographs of Scene and Vehicles
☐ Exhibit F — Wage Loss Verification / Employer Letter
☐ Exhibit G — Permanent Impairment Report
☐ Exhibit H — Life Care Plan / Future Medical Cost Opinion
☐ Exhibit I — Tortfeasor Insurance Verification / Coverage Denial Letter
☐ Exhibit J — [________________________________]

CC:

• [________________________________] (Client)
• [________________________________] (Tortfeasor's Carrier — re: Consent to Settle)

ILLINOIS UM/UIM LAW — QUICK REFERENCE

SOURCES AND REFERENCES

• 215 ILCS 5/143a (UM Coverage): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=021500050K143a
• 215 ILCS 5/143a-2 (UIM Coverage): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=021500050K143a-2
• 215 ILCS 5/155 (Vexatious Delay): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=021500050K155
• 215 ILCS 5/154.6 (Unfair Claims Practices): https://www.ilga.gov/legislation/ilcs/documents/021500050K154.6.htm
• Ill. Admin. Code tit. 50, pt. 919 (Improper Claims Practice): https://www.law.cornell.edu/regulations/illinois/title-50/part-919
• 625 ILCS 5/7-203 (Financial Responsibility Minimums): Illinois Vehicle Code
• 735 ILCS 5/13-205 (5-Year Contract SOL): Illinois Code of Civil Procedure
• Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 675 N.E.2d 897 (Ill. 1996)
• Farmers Automobile Insurance Ass'n v. Coulson, 402 Ill. App. 3d 779 (5th Dist. 2010)
• ISBA, "Liability Minute: Contractual Arbitration Limitation Period for Uninsured Motorist Insurance Policies" (Apr. 25, 2013): https://www.isba.org/barnews/2013/04/25/liability-minute-contractual-arbitration-limitation-period-uninsured-motorist-insura
• Illinois Department of Insurance (IDOI): https://insurance.illinois.gov
• AAA Government UM/UIM Arbitration Rules: https://www.adr.org/sites/default/files/Government%20IL%20Uninsured%20Underinsured%20Motorist%20Rules%20-%20Web%20File.pdf