6.4 Part C Uninsured/Underinsured Motorists

Part C - Uninsured/Underinsured Motorists Coverage

Part C is first-party coverage that steps into the shoes of an at-fault driver who cannot pay. It allows a covered person to recover the bodily injury damages (and in some states property damage) they would have been legally entitled to collect from a negligent driver who is uninsured or underinsured.

Because Part C requires the other driver to be legally liable, the insured must establish fault and damages just as in a third-party suit — but the recovery comes from the insured's own insurer. Many states require UM to be offered or included; UIM is often a coverage the insured may add.

Three Triggering Situations

Underinsured example. Your UIM limit is $100,000. The at-fault driver carries only $25,000 BI liability and your injuries are valued at $90,000. The at-fault insurer pays its $25,000; UIM then pays the difference up to its own limit — here $90,000 − $25,000 = $65,000. UIM does not pay the full $100,000 because it fills only the gap up to your actual damages.

How Limits Combine

States use one of two UIM approaches:

• Difference/offset states reduce the UIM limit by what the at-fault driver paid (the example above).
• Excess/add-on states let UIM sit on top of the tortfeasor's limit, increasing total recovery.

Stacking lets an insured combine the UM/UIM limits of multiple owned vehicles on the same policy. "Inter-policy" stacking combines separate policies; "intra-policy" stacking combines vehicles on one policy. Many states permit stacking unless validly waived; others prohibit it by anti-stacking statute or policy language. The exam tests that stacking can multiply available limits (e.g., three $50,000 UM cars stacked = $150,000).

Watch These Rules

• UM/UIM limits are usually written like Part A (split or CSL) and frequently must be offered at limits equal to the liability limit unless rejected in writing.
• A covered person generally cannot settle with the at-fault party without the UIM insurer's consent, or the insurer may deny coverage (it protects its subrogation rights).
• UMPD (uninsured motorist property damage) is available in some states and often carries a deductible; many states cover only BI under Part C.
• A vehicle is NOT "uninsured" simply because the limits are low — if limits exist but are inadequate, that is an underinsured (UIM) situation, not UM.
• Disputes over UM/UIM amounts are typically resolved by arbitration as provided in the policy.

Who Collects and What They Must Prove

The same two-tier covered-person rule from Part B applies: you and resident family members are covered in any auto or as pedestrians; other occupants are covered only in your covered auto. The injured person must show the other driver was at fault and quantify damages, because UM/UIM only pays what the insured could legally have recovered from that driver.

Hit-and-run / phantom vehicle claims require extra proof to deter fraud. Most policies demand that the insured report the accident to police promptly and, in many states, show physical contact with the unidentified vehicle or provide independent corroboration. A single-car crash blamed on a vanished phantom with no contact and no witnesses is frequently denied — a tested trap.

Multiplying and Offering Limits

Stacking example. A single policy insures three autos, each with $50,000/$100,000 UM. In a state that permits intra-policy stacking and where the insured paid a separate premium per car, the available UM per-person limit becomes 3 x $50,000 = $150,000. In an anti-stacking state or where stacking was validly waived, the limit stays $50,000 regardless of the number of vehicles.

Key offer-and-rejection rules tested on the exam:

• UM/UIM must generally be offered at limits equal to the liability limit; lower limits or rejection require a signed written waiver.
• A vehicle owned by a government entity or self-insurer may count as uninsured for UM purposes in some states.
• Settling with the tortfeasor without the UIM insurer's consent can forfeit coverage by destroying subrogation rights.
• UM/UIM amount disputes are resolved by arbitration when the policy so provides, not automatically by lawsuit.

Stacking, Offsets, and the UM/UIM Trigger

Uninsured motorists (UM) responds when the at-fault driver has no insurance, is a hit-and-run, or the insurer is insolvent; underinsured motorists (UIM) responds when the at-fault driver has insurance but less than the injured insured's damages. In offset (limits-trigger) states, UIM pays the difference between the insured's UIM limit and the at-fault driver's BI limit; in add-on states UIM stacks on top. Stacking (combining limits across multiple owned vehicles or policies) is allowed in some states and barred by anti-stacking language in others. Worked: $100,000 UIM in an offset state vs.

an at-fault driver carrying $25,000 — UIM pays up to $75,000 ($100,000 − $25,000).