6.4 Part C Uninsured/Underinsured Motorists

Part C - Uninsured and Underinsured Motorists

Part C pays the insured's own damages for bodily injury (and, in some states, property damage) caused by an uninsured (UM) or underinsured (UIM) motorist who is legally liable. It steps into the shoes of the missing or inadequate liability coverage of the at-fault driver, so the insured must be legally entitled to recover - the other driver must be at fault.

UM/UIM is first-party coverage that supplements Part A. Because it requires the other party's fault, it is conceptually different from no-fault Part B: Part B pays regardless of fault; Part C pays only when someone else is to blame and cannot pay.

Uninsured vs. Underinsured

A vehicle is not uninsured if it is owned/operated by a self-insurer, a government unit, or - importantly - if it is the insured's own covered auto (you cannot collect UM from yourself). A hit-and-run generally requires physical contact in many states, though some allow a corroborated phantom-vehicle claim.

Worked Numeric - Underinsured Motorist (Difference Approach)

The at-fault driver carries only $25,000 BI liability. The injured insured carries $100,000 UIM and proves $80,000 in damages. Under the common "difference of limits" approach:

• The insured collects the at-fault driver's $25,000 liability limit first.
• The insured's UIM then pays the gap up to its limit: $80,000 proven damages - $25,000 already collected = $55,000 from UIM.
• Total recovery = $80,000 ($25,000 + $55,000), fully indemnifying the insured.

Note: states vary between "difference of limits" and "excess/reduced" offset methods. Under a reducing approach, the UIM limit ($100,000) is reduced by the $25,000 already paid, leaving up to $75,000 available - here still enough to cover the $55,000 gap. Read the exam's state outline for the local rule.

Who Is an Insured and Stacking

For Part C, an insured is you or any family member, plus any other person occupying your covered auto, and anyone entitled to recover damages because of injury to those persons.

Stacking lets an insured combine UM/UIM limits across multiple vehicles or policies:

• Intra-policy stacking - combining limits across vehicles on one policy.
• Inter-policy stacking - combining limits across separate policies.

Many states and ISO endorsements prohibit or limit stacking through anti-stacking language, and UM/UIM is a coverage insurers must offer and that insureds often must reject in writing to waive. Limits selection and written rejection are frequent exam points.

Split Limits, Offsets, and the UM/UIM Decision

UM/UIM is written with its own limits, often matching the Part A liability split (for example 100/300 for BI). When multiple insureds are hurt by one uninsured driver, the per-person and per-accident caps apply exactly as they do under Part A. A single severely injured claimant is capped at the per-person amount; total recovery across all claimants cannot exceed the per-accident amount.

UIM trigger tests vary by state and decide whether a claim even opens:

• Limits-trigger (difference) states: UIM responds whenever the at-fault driver's liability limit is lower than the insured's UIM limit.
• Damages-trigger (excess) states: UIM responds only when the damages exceed the at-fault driver's available liability, and the UIM limit may be reduced (offset) by what the insured already collected.

Because the offset method changes the math, candidates should always identify whether the question is set in a difference state or a reducing state before computing the payout.

Part C Traps

• The insured must be legally entitled to recover - if the insured was the at-fault party, Part C does not respond.
• UM property damage (UMPD) is not standard in every state; many require collision coverage instead.
• Payments under Part C may be reduced by amounts paid under Part A, Part B, or workers compensation to prevent double recovery.
• A vehicle owned by the named insured but not insured on the policy is generally not an uninsured motor vehicle (the "owned-but-not-insured" exclusion blocks collecting UM for your own uninsured car).
• The other driver being uninsured does not waive the requirement that they be at fault.