6.4 Part C Uninsured/Underinsured Motorists
Key Takeaways
- Part C pays what the insured is legally entitled to recover from an at-fault uninsured or underinsured driver; the OTHER driver must be at fault.
- UM applies when the at-fault vehicle has no insurance, an insolvent insurer, or is a hit-and-run; UIM applies when the at-fault limits are too low.
- Difference-in-limits states set UIM = your limit minus the at-fault limit; damages-exceed states fill the gap up to your limit, preventing windfall.
- A vehicle owned by or furnished for the regular use of you or a family member is NOT 'uninsured' — you cannot UM-claim your own household car.
- UM/UIM is usually mandatory or must be offered with signed rejection; amount disputes are commonly settled by arbitration.
Part C - Uninsured and Underinsured Motorists Coverage
Part C steps into the shoes of the at-fault other driver's missing liability coverage. It pays compensatory damages an insured is legally entitled to recover from the owner or operator of an uninsured or underinsured motor vehicle because of bodily injury. In effect, the insured's own policy becomes the source of recovery when the responsible party cannot pay.
Crucial trigger: Part C requires the other driver to be at fault. If your insured caused the accident, Part C does not respond — that is the difference from Part B, which ignores fault.
Uninsured (UM) vs. Underinsured (UIM)
- Uninsured Motorists (UM) applies when the at-fault vehicle has no liability insurance, the insurer is insolvent, or it is a hit-and-run ("phantom vehicle") that flees and cannot be identified. Many states require physical contact for a hit-and-run UM claim.
- Underinsured Motorists (UIM) applies when the at-fault driver has insurance, but its limits are too low to fully cover the insured's injuries.
Most states cover bodily injury under UM/UIM. A minority of states offer Uninsured Motorists Property Damage (UMPD) for damage to the insured's vehicle, sometimes subject to a deductible. UM/UIM is mandatory or must be offered (with a signed rejection) in most states.
How UIM Pays - The Two Approaches
States use two models for measuring UIM benefits, and exams test the difference:
- Difference-in-limits (excess) states: UIM equals your UIM limit minus the at-fault driver's liability limit.
- Damages-exceed (reduction) states: UIM fills the gap between the at-fault driver's payment and the insured's actual damages, up to your UIM limit.
Worked example (difference-in-limits): Your UIM limit is $100,000. The at-fault driver carries $25,000 of BI liability and pays it. Your injuries total $90,000. UIM available = $100,000 − $25,000 = $75,000. You collect $25,000 (from them) + $75,000 (UIM) = $100,000, fully covering the $90,000 loss.
Same facts, damages-exceed model: UIM fills $90,000 − $25,000 = $65,000 (your actual unmet damages), since that gap is below your $100,000 cap. You collect $25,000 + $65,000 = $90,000 — exactly your damages, no windfall.
Who Is an Insured Under Part C
Under Part C, an insured includes you and family members, plus any other person occupying your covered auto, and anyone else entitled to recover damages because of bodily injury to those persons (for example, a spouse's loss-of-consortium claim or a parent's claim for an injured child).
The protection follows you as an occupant of any auto and as a pedestrian, mirroring the breadth seen in Part B, while unrelated persons are protected only inside your covered auto.
Key Conditions and Traps
- A vehicle is not "uninsured" if it is owned by or available for the regular use of you or a family member — you cannot UM-claim against your own household vehicle.
- A vehicle owned by a governmental unit is generally excluded from the UM definition.
- Stacking: some states permit stacking of UM/UIM limits across multiple vehicles or policies; others enforce anti-stacking provisions. The policy's "Other Insurance" and limit-of-liability language caps recovery so the insured does not exceed actual damages.
- Disputes over the amount the insured is "legally entitled to recover" are often resolved by arbitration under the policy.
- UM/UIM limits are typically offered up to the insured's Part A liability limit, and most states require the insurer to offer UM/UIM with a signed rejection if the insured declines.
Consent-to-Settle and Subrogation
Because the insured's own insurer pays UM/UIM benefits but the at-fault party caused the loss, the policy protects the insurer's recovery rights. Many UIM provisions contain a consent-to-settle requirement: before the insured accepts a settlement from the at-fault driver's liability insurer, the insured must give the UIM insurer the opportunity to protect its subrogation rights, often by advancing payment equal to the tentative settlement.
If the insured settles and signs a release without that consent, the UIM insurer may be able to deny the claim. On the exam, tie this back to the conditions in Part E and Part F: cooperation, prompt notice, and preserving subrogation are duties the insured must honor to keep UM/UIM coverage intact.
Putting the Parts Together
| Scenario | Responding Part |
|---|---|
| Insured at fault, injures a third party | Part A (Liability) |
| Insured's own/passenger medical bills, fault irrelevant | Part B (Medical Payments) |
| Other driver at fault but uninsured or underinsured | Part C (UM/UIM) |
| Insured's own car damaged by collision or hail | Part D (Physical Damage) |
Trap: A hit-and-run that injures the insured is a UM (Part C) claim, not a Part A claim — Part A only responds when the insured is the liable party. And the insured cannot collect UM for injuries caused by their own household vehicle.
Part C — Uninsured and Underinsured Motorists
Part C (Uninsured/Underinsured Motorists) pays bodily injury damages the insured is legally entitled to recover from an uninsured (UM) or underinsured (UIM) at-fault motorist. An uninsured motorist is one with no liability insurance, with insurance below the state minimum, whose insurer is insolvent, or a hit-and-run driver who cannot be identified. An underinsured motorist has liability insurance, but with limits lower than the injured insured's damages (or, in some states, lower than the insured's own UIM limit).
UM/UIM steps into the shoes of the missing liability coverage, so the insured must prove the other driver's fault and the amount of damages — disputes go to arbitration under most forms. Many states make UM coverage mandatory (or mandatory to offer with a written rejection), and UIM is frequently offered alongside it.
UIM Limits, Offsets, and Stacking
The exam tests how UIM limits interact with the at-fault driver's coverage. Under the common "limits" (difference) approach, UIM pays the gap between the insured's UIM limit and the amount actually recovered from the at-fault driver — so a $100,000 UIM limit against a driver carrying $25,000 yields up to $75,000 more, if damages support it. A few states use an "excess" or "damages" approach that adds UIM on top of the tortfeasor's limit. Many forms offset UIM by amounts paid under liability, Med Pay, or workers' compensation to prevent double recovery.
Stacking — combining UM/UIM limits across multiple vehicles or policies — is permitted in some states and barred by anti-stacking language in others. Property damage UM is available in some states (often with a deductible) but not all. Because UM/UIM rules vary so much by state, exam questions usually test the concepts (who qualifies as uninsured/underinsured, the difference vs. excess approaches, fault and damages must be proven) rather than a single national number.
In a difference-in-limits state, an insured carries $250,000 UIM. The at-fault driver has $50,000 BI liability and pays it in full. The insured's injuries total $200,000. How much UIM does the insured actually collect?
An unidentified hit-and-run driver injures the insured and flees. Which Part of the PAP responds to the insured's bodily injury?