Underinsured motorist coverage protects you when the at-fault driver has some insurance, but not enough. When serious crashes produce damages exceeding the other driver’s limits, UIM coverage bridges the gap. Understanding how UIM coverage works helps accident victims maximize recovery.
The Underinsurance Problem
Inadequate coverage is common:
Minimum Limits
Many drivers carry only state minimum coverage.
Serious Injury Costs
Serious injuries easily exceed minimum limits. A catastrophic injury can produce millions in damages.
Coverage Gap
The difference between available coverage and actual damages is the underinsurance gap.
How UIM Coverage Works
Underinsured motorist coverage:
Gap Coverage
Pays the difference between the at-fault driver’s limits and your damages, up to your UIM limits.
First-Party Coverage
You recover from your own insurer.
Excess Coverage
Applies only after the at-fault driver’s coverage is exhausted.
Triggering UIM Coverage
UIM coverage applies when:
Liability Established
The other driver is at fault for the accident.
Damages Exceed Available Coverage
Your damages exceed the at-fault driver’s liability limits.
Your UIM Limits Exceed Their Liability
If both policies have $50,000 limits, there may be no UIM coverage available.
Calculating UIM Benefits
UIM benefit calculations vary:
Offset Method
UIM coverage equals your limits minus the at-fault driver’s liability payment.
Example: Your $100,000 UIM minus their $25,000 liability = $75,000 UIM available.
Add-On Method
UIM coverage adds to the at-fault driver’s coverage.
Example: Their $25,000 liability plus your $100,000 UIM = $125,000 total available.
Jurisdictional Variation
States differ on which method applies.
The Consent-to-Settle Requirement
Before settling with the at-fault driver, you typically must:
Notify Your UIM Carrier
Inform them of the proposed settlement with the other driver’s insurer.
Obtain Consent
Get your UIM carrier’s approval before accepting the liability settlement.
Preserve Subrogation
This allows your insurer to subrogate against the at-fault driver if appropriate.
Consequences of Violation
Settling without consent may forfeit UIM coverage.
Stacking UIM Coverage
Multiple UIM coverages may apply:
Intra-Policy Stacking
Stacking limits from multiple vehicles on the same policy.
Inter-Policy Stacking
Combining limits from different policies.
Anti-Stacking Provisions
Policies may limit stacking.
State Law Variations
Some states mandate stacking availability. Others permit restrictions.
Common UIM Disputes
Liability Disputes
Your UIM insurer may dispute that the other driver was fully at fault.
Damage Disputes
Your insurer may value damages lower than you claim.
Exhaustion Issues
Disputes about whether the at-fault driver’s coverage was properly exhausted.
Coverage Defenses
Policy conditions or exclusions that may limit coverage.
Arbitration of UIM Claims
Many UIM policies require arbitration:
Binding Arbitration
Disputes resolved by arbitrators rather than courts.
Panel or Single Arbitrator
Procedures vary by policy and jurisdiction.
Limited Discovery
Arbitration often has more limited discovery than litigation.
Faster Resolution
Typically resolves more quickly than court cases.
Bad Faith in UIM Claims
First-party bad faith applies to UIM claims:
Duty to Policyholders
Insurers owe good faith to their own policyholders.
Unreasonable Denials
Denying valid claims or undervaluing damages may constitute bad faith.
Bad Faith Remedies
May include extracontractual damages.
Coordination with Other Coverage
UIM coverage interacts with other sources:
UM Coverage
Some policies combine UM and UIM into single coverage.
Health Insurance
May pay medical expenses with subrogation rights.
MedPay/PIP
First-party medical coverage applies regardless of fault.
Procedural Requirements
Pursuing UIM claims requires compliance:
Timely Notice
Notify your insurer of potential UIM claims promptly.
Cooperation
Cooperate with your insurer’s investigation.
Documentation
Provide requested documentation of damages.
Arbitration Compliance
Follow policy arbitration procedures.
Strategic Considerations
Settlement Timing
When to settle with the at-fault driver affects UIM claim dynamics.
Consent Procedures
Follow consent requirements carefully to preserve coverage.
Stacking Analysis
Identify all potentially applicable UIM coverage.
Bad Faith Awareness
Recognize when insurer conduct may constitute bad faith.
Practical Guidance
Purchase UIM limits equal to your liability limits.
Notify your insurer before settling with at-fault drivers.
Document damages thoroughly for your UIM claim.
Understand whether offset or add-on calculation applies.
Explore stacking possibilities to maximize coverage.
Consider arbitration procedures and timing.
UIM coverage is essential protection against drivers with inadequate insurance. When serious injuries produce damages exceeding available liability coverage, UIM fills the gap between what the other driver can pay and what you need.
Sources:
- Offset vs. add-on calculation methods: State insurance codes and case law
- Consent-to-settle requirements: Standard UIM policy provisions
- Stacking availability: State insurance regulations