family of crash test dummies fallingAs personal injury attorneys, we frequently see people with car insurance coverage after they’ve been involved in a traffic collision. Gaps in coverage can deliver an unpleasant surprise to unknowing policy holders. One common example is known as a “drop down” or “step down” coverage, or “household exclusion.” By any name, “drop down” provisions can leave people terribly exposed when they thought they were covered.

If you or your family members have been injured as passengers in a car and you have questions about insurance policies, calling an experienced personal injury attorney is an important step.

Minnesota automobile insurance policies must offer minimum protection for both liability and uninsured/underinsured motorists (UM/UIM). “Liability” protects you if you cause a car crash, while UM/UIM protects you if you are hurt by a driver who either has no insurance or not enough to pay your damages. The minimum liability coverage required in Minnesota is $30/$60,000, while the minimum UM/UIM coverage is $25/$50,000. However, most choose to buy more because the minimums are so inadequate.

People who buy additional UM/UIM coverage do so to provide additional protection for themselves and their loved ones. Tragically, though, people who may have bought $200,000 or more in UM/UIM coverage can learn too late (i.e. after a car crash) that they have a “drop down” provision buried in their policy, which means that a passenger spouse or one of their children hurt in a crash with an uninsured/underinsured driver may have only the minimum $25/$50,000 in coverage. This is because the auto insurance policy, while providing the full UM/UIM coverage for the driver, drops down coverage within the fine print of the policy for family members who are passengers to the state minimum requirement. State law does not require that a “drop down” provision appear in the policy’s declaration page, so it can be carefully hidden in the dense policy language that lists exclusions.

“Drop down” provisions can affect liability coverage, as well. The minimum liability coverage for car insurance policies in Minnesota is $30/$60,000. If you and your spouse purchase a policy with $500,000 in liability coverage, you’d expect that injured members of your family could make a claim for up to the policy limit. However, if a parent or a child who is a passenger is injured because of the negligent driving of a family member and the policy includes a “drop down” provision, the policy cap may drop down to the state minimum of $30,000 for an individual, or $60,000 total.

Finding out that your coverage has dropped down to the minimum after you or another family member who is driving have injured a family member passenger can be a disaster. If you have auto insurance in Minnesota, make sure you read the policy carefully to check for “drop down” coverage provisions. Ask your agent plenty of questions, but be aware that, under Minnesota law, insurance agents are not held to knowing everything that is in the policies they sell.

Below is an example of a drop down provision. It comes from a court case. A woman lost her life due to her husband’s negligent driving. Her next-of-kin sued and won. The insurance company appealed and ultimately did not have to pay more than the minimum state-required coverage amount, even though the policy purchaser had bought one million dollars in coverage. What the purchaser didn’t know was that the “drop down” language was hidden in the insurance contract. If you find wording similar to that displayed below, we recommend you immediately have your policy either amended to eliminate the “drop down” provision in your auto insurance policy or go to another insurance company for more complete coverage.

Drop Down Provision Example

The Policy requires [the liability carrier] to “pay compensatory damages an insured person is legally liable for because of bodily injury” and defines “[i]nsured person” as including “[a]ny person using your insured car.” (J.A. 35 (emphases omitted).)   The Policy lists 13 exclusions from liability coverage, including this household drop-down exclusion:

This coverage does not apply to ․

10.  Bodily injury to:

a.  Any person injured while operating your insured car;

b. You or any person related to you and residing in your household;  or

c. Any person related to the operator and residing in the household of the operator.

This exclusion applies only to the extent the limits of liability of this policy exceed the limits of liability required by law.

Babinski v. American Family Insurance Group, 569 F.3d 349 (8th Cir. 2009)

If you require assistance, call our office today. We’ve recovered more than $125 million for victims.

Besides Rochester, we serve the following major southeast Minnesota cities: Red Wing, Winona, Mankato, Austin, Albert Lea, and Owatonna, and all outlying communities, as well as the cities of Minneapolis, St. Paul, Duluth, and Bloomington. We also serve the Iowa cities of Mason City, Charles City, Osage, Spencer, Garner, Forest City, and Northwood and the Wisconsin cities of La Crosse, Onalaska, Sparta, Viroqua, River Falls, Ellsworth, Whitehall, and Black River Falls.