6.4 Part C Uninsured/Underinsured Motorists

Part C — Uninsured Motorists Coverage (UM) pays compensatory damages an insured is legally entitled to recover for bodily injury caused by the owner or operator of an uninsured motor vehicle. Although Part C is a first-party coverage (the insured collects from their own insurer), it is fault-based: the insured must show that the other driver was legally liable and prove the damages, exactly as if suing that driver.

An uninsured motor vehicle includes a vehicle with no liability insurance, a vehicle whose insurer denies coverage or becomes insolvent, and a hit-and-run vehicle whose owner or driver cannot be identified.

UM vs. UIM — the Trigger Difference

UIM fills the gap between the at-fault driver's inadequate limit and the insured's own UIM limit. It does not stack without limit — recovery is coordinated.

Trap: A driver with the state-minimum 25/50/20 limit is still insured, so UM does not apply when their limit is too low for the injuries — the correct coverage is UIM, not UM.

Hit-and-Run and UM Property Damage

For a UM bodily injury claim arising from a hit-and-run, the insured must report promptly and cooperate; the identity of the at-fault driver is unknown but the claim proceeds against the insured's own UM coverage.

Many states also offer Uninsured Motorist Property Damage (UMPD), which pays for damage to the insured's vehicle caused by an uninsured driver, often subject to a small deductible (frequently $200 to $250). Some states require actual physical contact with the phantom vehicle for a UMPD hit-and-run claim, to deter staged single-car losses. Where Collision coverage already exists, UMPD may be redundant; it is most valuable to insureds without Collision.

Worked UIM Offset — Difference-in-Limits Approach

Assume the insured carries $100,000 UIM. The at-fault driver carries only Nevada's minimum $25,000 per-person liability, and the insured's proven damages are $80,000.

1. At-fault driver's insurer pays the insured $25,000 (its per-person limit).
2. Under the common difference-in-limits (offset) approach, UIM pays proven damages minus the amount received from the at-fault driver: $80,000 − $25,000 = $55,000.
3. Total recovery = $25,000 + $55,000 = $80,000 — full indemnity for proven damages.

The UIM limit of $100,000 was not exhausted; the insured collected only what was proven.

Worked UIM Offset — When Damages Exceed UIM Limit

Facts: insured's UIM limit = $100,000; proven damages = $130,000; at-fault driver's liability limit = $25,000.

1. At-fault driver pays $25,000.
2. UIM available = $100,000 UIM limit − $25,000 offset = $75,000 maximum from UIM.
3. Total recovery = $25,000 + $75,000 = $100,000.
4. The remaining $30,000 above the UIM cap is uninsured — the insured bears that loss unless other sources exist.

Trap: UIM does not pay the full $100,000 on top of the $25,000 without limit. The offset subtracts what the at-fault driver's policy paid from the UIM limit before calculating the UIM payment.

Nevada Scenario — Minimum Limits and UIM

A Sparks commuter carries $100,000 UIM and is T-boned by a driver with only 25/50/20 liability. The commuter's proven bodily injury damages are $90,000.

• The at-fault driver's insurer pays $25,000 (per-person BI cap).
• UIM pays $90,000 − $25,000 = $65,000.
• Total = $90,000.

If damages had been only $20,000, the at-fault driver's policy would pay $20,000 in full and UIM would pay $0 — the at-fault driver's limits were adequate for the loss, so UIM does not trigger.

Limits, Stacking, and Rejection

UM/UIM limits are usually offered equal to the insured's Part A liability limit unless the insured selects a lower amount or rejects the coverage in writing. Many states mandate a written rejection or reduced-limit selection because UM/UIM is consumer-protective; absent a valid rejection, coverage may default to the liability limit by operation of law.

Some states permit stacking — adding UM/UIM limits of multiple vehicles or policies — while others prohibit it through anti-stacking language. Because UM/UIM is fault-based, the insurer steps into the position of the negligent driver and may dispute liability and damages; disagreements are commonly resolved by arbitration under the policy's UM provisions.

Comparing the Injury Coverages — Exam Summary

When a Pearson VUE item describes a phantom driver who fled the scene, think UM. When the other driver has a valid policy but 25/50/20 limits and the victim's damages exceed $25,000 per person, think UIM. Draw the timeline, label the limits, and apply the offset before you select an answer.