The standard automobile insurance policy in North Carolina contains many different kinds of insurance coverage. Among those are liability coverage and underinsured motorist (UIM) coverage. These insurance coverages provide different kinds of protection when someone is injured in an automobile accident. Liability coverage protects you in the event that you cause a collision injuring another party, whereas underinsured motorist coverage protects you if you are struck by someone who does not have sufficient liability coverage. A “Release of All Claims and Covenant Not to Enforce Judgment” is a type of release or settlement agreement that is used in situations where the at-fault party’s insurer has “tendered its limits” and offered you the full amount of its insured’s coverage.
The easiest way to explain the interplay between liability and UIM coverage is through an example. Imagine that you are seriously hurt in a North Carolina car collision. Your damages for medical bills and lost wages, along with physical pain and suffering, are fairly estimated at $250,000.00. Now imagine further that the negligent motorist that caused the collision wherein you were injured is a 19 year old driver who has purchased a $30,000.00 liability policy, the minimum in North Carolina. While his or her insurer should pay the full $30,000.00 limit to you, this still leaves you with $220,000.00 in unpaid damages. You could file suit against the 19 year old to recover the remainder, but he or she is unlikely to have that kind of money.
This is where underinsured motorist coverage kicks in. Up to the limit you have purchased, it will make up the difference between your damages and the amount paid out by the at-fault party’s liability carrier. Assume you had purchased a $300,000.00 UIM policy. In this scenario, you could theoretically recover the full $220,000.00 from your own insurer. On the other hand, if you had only purchased a $100,000.00 UIM policy, you could recover only $70,000.00 from your policy and would be left to collect the remaining $150,000.00 from the 19 year old (assuming no other policies were in play).
It will ask that you sign this Covenant in order to protect its insured. The Covenant Not to Enforce Judgment essentially prevents you from ever attempting to collect against the personal assets of the negligent party. So, in the above example, the at-fault party’s insurer would indicate that it would pay the $30,000.00 in exchange for you agreeing to never collect against the 19 year old. This might be fine if you have $300,000.00 in UIM coverage but maybe not if you only had $100,000.00 in UIM.
Signing a Covenant Not to Enforce Judgment without first speaking to an attorney is almost never a good idea. Insurance coverage issues can be incredibly complicated, and the at-fault party may have assets or otherwise have additional insurance policies which provide liability coverage. For example, it may the case that the at-fault 19 year old live at home with his or her parents but has a separate automobile policy. The liability coverage under both of these policies would apply, and by executing the Covenant Not to Enforce Judgment, you likely waive the right to the liability funds from that other policy. An attorney can help ensure that you are aware of all potential insurance coverages and maximize your recovery under each. Even though your UIM carrier owes you certain obligations, in the context of a UIM claim, they still treat you as an adverse party. If they refuse to pay reasonable compensation, an attorney can assist you through the process of filing suit and going to arbitration to force your carrier to pay a fair amount.
Maginnis Law handles its personal injury cases, including those involving Underinsured Motorist coverage, on a contingency basis – meaning that you pay no attorneys’ fees unless we reach a settlement or obtain a verdict in your case. We offer free consultations and would be glad to discuss your case with you, including any issues involving insurance coverage or a Release of all claims and Covenant Not to Enforce Judgment. To contact the firm, call 919.480.8526 or use our contact page. The firm represents injury claimants throughout North Carolina, including Raleigh, Chapel Hill, Durham, Cary, Fayetteville, Apex, Greenville, and Greensboro.