6.4 Part C Uninsured/Underinsured Motorists

Part C: Uninsured and Underinsured Motorists Coverage

Part C pays damages a covered person is legally entitled to recover from the owner or operator of an uninsured (UM) or underinsured (UIM) motor vehicle because of bodily injury (and, in some states, property damage). It steps into the shoes of the at-fault driver's missing or insufficient liability coverage and is first-party coverage that you collect from your own insurer. UM/UIM limits usually equal the insured's liability limits unless the insured signs a written selection of lower limits or a rejection where permitted.

What is an 'uninsured' vehicle

An uninsured motor vehicle includes a vehicle that:

• Has no bodily-injury liability bond or policy in effect at the time of the accident.
• Is covered by liability insurance, but the insurer denies coverage or becomes insolvent.
• Is a hit-and-run vehicle whose owner or operator cannot be identified and which strikes you, a family member, or your covered auto.

An uninsured vehicle does not include a vehicle owned by or furnished for the regular use of the insured, a self-insured vehicle, or a government-owned vehicle (these are common exclusions).

Underinsured motorists (UIM)

A vehicle is underinsured when its liability limit is less than the damages the covered person is entitled to recover. Most states use a 'difference' (excess) approach: UIM pays the gap between the at-fault driver's limit and the insured's UIM limit. A minority use a 'reduction' approach that subtracts the amount already paid from the UIM limit.

Worked difference-state example: The insured has $100,000 UIM. The at-fault driver carries $25,000 BI and the insured's proven damages are $90,000. The at-fault insurer pays $25,000; UIM pays the difference up to the insured's limit: $90,000 - $25,000 = $65,000. Total recovered = $90,000.

Reduction-state contrast

In a reduction state with the same facts ($100,000 UIM, $25,000 paid, $90,000 damages), UIM pays the limit minus amounts paid: $100,000 - $25,000 = $75,000 maximum available, but capped at remaining damages of $65,000, so the insured still nets $90,000 here. The approaches diverge when damages are large: with $150,000 damages, a difference state pays $100,000 - $25,000 = $75,000 (total $100,000); a reduction state also pays $75,000. The mechanical difference matters most where the UIM limit is close to the tortfeasor's limit. Always identify the state's offset rule before computing.

Triggers, stacking, and conditions

• Trigger for UIM: the at-fault driver's liability limit is exhausted/insufficient; many states require the insured to give the UM/UIM carrier notice and a chance to consent before settling with the tortfeasor (a subrogation-protection condition).
• Stacking: some states allow inter-policy or intra-policy stacking (adding UM limits across multiple vehicles or policies); others bar it by an anti-stacking clause.
• Arbitration: Part C historically used arbitration to resolve disputes over fault and damages; current ISO editions limit mandatory arbitration to the amount in some states.

Trap: UM/UIM does not pay for the insured's own negligence and is reduced by workers' compensation and certain other benefits; it is bodily-injury focused, with UMPD a separate, often state-specific add-on.

UMPD and the 'phantom vehicle' rule

Some states add Uninsured Motorists Property Damage (UMPD), which pays for damage to the insured's auto caused by an uninsured at-fault driver, often subject to a deductible (commonly $200-$300). A frequent exam point: for a hit-and-run to trigger UM, most states require either physical contact with the unidentified vehicle or independent corroborating evidence - a 'phantom vehicle' that merely forces the insured off the road without contact may be denied unless the state's amendatory endorsement specifically allows it. Read the state rule: physical-contact requirements vary widely and are a common claim-denial scenario.

Mandatory vs. optional and rejection rules

UM bodily injury is mandatory in most states, while UIM and UMPD are frequently optional but must be offered in writing at limits equal to the insured's liability limits. To buy lower limits or to reject the coverage entirely (where allowed), the named insured generally must sign a written waiver/selection form; absent a valid signed rejection, courts often reform the policy to provide UM/UIM equal to the liability limit. A worked split example: with 100/300 liability, the default UM/UIM offer is 100/300 BI; the insured nets up to $100,000 per injured person and $300,000 per accident against an uninsured tortfeasor.

UM, UIM, and the Two Approaches to "Underinsured"

Part C protects the insured when the at-fault driver has no insurance (Uninsured Motorist, UM) or not enough insurance (Underinsured Motorist, UIM). UM also responds to a hit-and-run (a "phantom vehicle") where physical contact, or corroborating evidence, is shown.

States measure "underinsured" two ways, and the difference is heavily tested:

Worked difference-state example: Insured carries $100,000 UIM; at-fault driver has $25,000 BI; damages are $90,000. The at-fault insurer pays $25,000; UIM pays the remaining $65,000 (up to the $100,000 UIM limit). In a reduction state, the UIM limit would first be reduced by the $25,000 received, capping UIM at $75,000.

UM/UIM coverage is mandatory in many states and must be offered in others, with the insured allowed to reject higher limits in writing. Damages are usually limited to bodily injury; UMPD (property damage) is a separate, optional add-on in some states.