The Coots Letter

Imagine you are injured in a severe car crash in Louisville. Medical bills and lost wages soar beyond $50,000. After getting medical attention and notifying insurance companies, the at-fault driver’s insurance steps up to pay. You feel relieved and ready for the whole ordeal to be over with. It would be so easy to just sign the paper, take the check, and let your own Underinsured Motorist (UIM) coverage cover the rest.

If you sign that release without taking a critical step, you destroy your right to collect from your UIM policy.

What Are Subrogation Rights?

Before tackling the Coots Letter, you must understand subrogation. This concept is where your insurer steps into your shoes to sue the at-fault driver. This is so they can recoup money they paid out to you. Both your Personal Injury Protection (PIP) and your UIM carrier have subrogation rights, but they handle them in unique ways. While your PIP carrier, required by Kentucky law to pay the first $10,000 of your medical bills, lost wages, and other losses, can arbitrate against the at-fault insurance carrier to get their $10,000 back, the UIM carrier is exposed to higher financial risks.

If you sign a standard liability release from the at-fault driver’s insurance company to accept their policy limits, you officially release that driver from all future liability. By doing this, you destroy your UIM insurance company’s right to sue them. By destroying your UIM company’s subrogation rights, they are legally allowed to deny your UIM claim completely.

The actual dollar amount of the at-fault driver’s settlement offer can set a devastating trap. In Kentucky, the statutory minimum bodily injury liability limit is $25,000. It’s common for an at-fault insurance adjuster to swoop in and offer a quick settlement of, for our example, $17,000. If you were eager to get this ordeal over with, accepting the quick money may feel like a win. In reality, settling for less than the absolute policy limits is an error that can drain your total recovery.

The Recovery Trap

The first part of this trap involves your PIP carrier. After paying $10,000 for medical bills, the PIP carrier has a right to get money back from the at-fault insurer. Yet under Kentucky law, settling for the at-fault driver’s maximum liability limit erases the PIP carrier’s right to subrogation. The law forces the PIP insurer to absorb that cost to ensure you are made as whole as possible by the liability limits.

If you settle for even a single dollar under the policy limit, the PIP carrier’s right to reclaim their money remains fully active. This means your own insurance company can dive into the settlement pool and scoop up their $10,000. Once you subtract their subrogation claim, attorney fees, and outstanding medical liens from a settlement less than $25,000 there will be practically nothing left for you or your family.

Additionally, your UIM carrier is only responsible for damages that exceed the at-fault driver’s liability coverage. If you accept a lower settlement then your UIM carrier is legally allowed to take a credit for the full $25,000 policy limit anyways. This means you absorb the difference out of your own pocket. This is why it is critical to have professional personal injury attorneys there to guide you through the process.

The Coots Letter

In 1993, the Kentucky Supreme Court decided a landmark case called Coots v. Allstate Ins. Co. which has since had its decision codified into Kentucky law. The court created a formal safety. Before an injured party can officially accept an at-fault settlement while preserving their UIM claim, they must send their own UIM insurance carrier a 30-day letter of notice via certified mail. This formal notice is known as the Coots Letter.

The procedure begins the moment the at-fault driver’s insurance company offers to settle. In most cases they will settle for their policy limits. The insurance company will send you a liability release form over with this offer. Do not sign this yet.

Before signing, have your attorney draft a formal Coots Notice to be sent via certified or registered mail to your UIM insurance provider. This letter details the proposed settlement terms and includes a copy of the liability limits offer.

The Coots Process

Under Kentucky law, your UIM insurance company now has a strict 30-day window from when they receive the letter to make a decision. From there your UIM insurance company has two options.

1. Consent: Your UIM insurance company waives their subrogation rights against the at-fault driver. This is when you are able to sign the settlement, take the money, and pursue your UIM claim with them.
2. Substitution: If your UIM insurance company believes the at-fault driver has personal assets worth chasing, they must write you a check for the exact same amount as the at-fault company’s settlement offer within 30 days. By doing this, they buy out the claim and preserve their rights to sue the at-fault driver.

If your UIM carrier consents or fails to respond within the 30 day window, you can safely sign the liability release, cash the at-fault driver’s check, and proceed with your UIM case.

Dont Navigate The Maze Alone

The legal path following a serious car wreck in Louisville is rarely a straight line. Between managing physical recovery, dealing with no-fault PIP claims, sending time-sensitive certified Coots notices, and negotiating with UIM adjusters, it’s easy to make a single procedural misstep that may cost your entire recovery.

At Kemper Law Office, we don’t believe that you should have to study insurance statutes while trying to heal. We handle the heavy lifting, the struct timelines, and the insurance company runarounds so that you can focus on getting your life back. If you have been injured in an accident and are facing mounting medical bills, protect your rights from day one. Reach out today for a free evaluation of your case.

If you would like us to review a potential case, feel free to call us at 502-771-0588 or email aaronkemper@lawhelplouisville.com.