6.4 Part C Uninsured/Underinsured Motorists

Part C: Uninsured/Underinsured Motorists

Part C provides Uninsured Motorists (UM) and, in most states, Underinsured Motorists (UIM) coverage. It is first-party coverage that pays the insured for bodily injury (and in some states property damage) caused by a driver who has no insurance or not enough insurance. The insured essentially steps into the shoes of the negligent driver's missing or inadequate liability policy.

A crucial point: the at-fault driver must still be legally liable. UM/UIM does not pay if the insured caused the accident.

Uninsured vs. Underinsured

A hit-and-run (phantom vehicle) is treated as uninsured. Many states require physical contact for a hit-and-run UM claim to deter fraud.

UIM Limit Approaches

States use two methods to determine how much UIM pays:

• Difference-in-limits (excess): UIM pays the gap between the insured's UIM limit and the at-fault driver's liability limit.
• Damages-minus-paid (deficiency): UIM pays the gap between the insured's actual damages and what the at-fault driver paid, capped at the UIM limit.

Worked example (difference-in-limits): Insured carries $100,000 UIM. The at-fault driver has $25,000 liability and pays it in full. The insured's damages are $80,000. UIM pays $100,000 − $25,000 = $75,000 available, but actual unpaid damages are only $80,000 − $25,000 = $55,000, so the insured collects $55,000.

Who Is Covered and Conditions

Like Med Pay, Part C covers the named insured and family members in any auto and as pedestrians, and other persons while occupying the covered auto. Key conditions:

• The insured generally must not settle with the at-fault party without the insurer's consent (to preserve subrogation rights).
• UM/UIM is stacked or non-stacked depending on state law and policy wording — stacking lets an insured combine limits across multiple owned autos.
• Disputes over fault or amount are often resolved by arbitration.

Exam Traps

• UM/UIM pays only when the other driver is at fault and inadequately insured — never for the insured's own liability.
• A driver with no insurance who is not at fault triggers nothing under UM.
• UM is for no-insurance or hit-and-run; UIM is for some-but-not-enough insurance. Many states require the insured's UIM limit to exceed the at-fault limit before UIM applies.
• Property damage UM (UMPD) is optional and unavailable in some states.

UM/UIM Structure, Stacking, and Exam Traps

Part C of the Personal Auto Policy pays for bodily injury (and in some states property damage) the insured is legally entitled to recover from an uninsured (UM) or underinsured (UIM) motorist. UM responds when the at-fault driver has no insurance, is a hit-and-run, or the insurer is insolvent; UIM responds when the at-fault driver's limits are lower than the insured's damages.

A core exam point is how UIM "kicks in." Most states use a difference-in-limits approach: if the insured carries $100,000 UIM and the at-fault driver has $25,000 liability, UIM provides up to $75,000 more after the $25,000 is paid. The insured cannot collect both the full UIM limit and the at-fault limit on top of each other for the same loss.

Worked example: Insured has $50,000 UIM; medical damages are $80,000; the at-fault driver carries $30,000. UIM pays $50,000 − $30,000 = $20,000, leaving $30,000 of damages unrecovered. Many states require insurers to offer UM/UIM equal to the liability limit, and the insured must reject higher limits in writing — a tested consumer-protection rule.

UM Property Damage, Hit-and-Run Proof, and Worked Stacking

In some states UM coverage includes Uninsured Motorist Property Damage (UMPD), which pays for damage to the insured's vehicle caused by an uninsured at-fault driver, often subject to a deductible. The exam tests that UMPD is distinct from Part D collision and may require physical contact in hit-and-run situations, so a "phantom vehicle" that forces the insured off the road without contact may not trigger UMPD even when bodily-injury UM applies.

Stacking is a heavily tested option: in states that allow it, an insured with three owned autos each carrying $50,000 UM may stack the limits to $150,000 for one injury. Anti-stacking clauses, where permitted, limit recovery to a single vehicle's limit. Worked example: An insured with stackable $50,000 UM on two cars suffers $90,000 in injuries from an uninsured driver; stacking yields $100,000 of available UM, fully covering the $90,000 loss, whereas an anti-stacking policy would cap recovery at $50,000, leaving $40,000 unrecovered.

• UM covers no-insurance, hit-and-run, and insolvent-insurer at-fault drivers.
• UIM covers at-fault drivers whose limits are lower than the insured's damages.
• The at-fault driver must be legally liable; UM/UIM never pays for the insured's own fault.
• Settling without insurer consent can void coverage by destroying subrogation rights.