3.4 Part C — Uninsured/Underinsured Motorist

UM vs UIM

Uninsured Motorist (UM) coverage responds when the at-fault driver has zero applicable liability coverage. Underinsured Motorist (UIM) coverage responds when the at-fault driver has some liability coverage, but not enough to pay the insured's damages. Both are first-party coverages that pay the insured for what a negligent other driver should have paid.

An 'uninsured motor vehicle' includes a vehicle that:

1. Has no liability bond or policy in effect at the time of the accident;
2. Is covered by an insurer that denies coverage or becomes insolvent;
3. Is a hit-and-run whose operator and owner cannot be identified (many states require physical contact, though case law has relaxed this);
4. Carries liability limits below the state-required minimum (some states classify this as UM, others as UIM).

Critically, a vehicle owned by or furnished for the regular use of the named insured or a family member is never an uninsured motor vehicle. This blocks an insured from collecting UM on the policy for an uninsured second car they own.

How UIM Pays

Under the common difference-in-limits and damages-based methods, the at-fault driver's liability payment is offset against the UIM recovery, so the insured is made whole only up to the UIM limit.

Hit-and-Run

A hit-and-run is treated as UM in every state. The PAP and most statutes require the insured to report to police promptly (often within 24 hours) and to provide a sworn statement to the insurer. Where physical contact is required by statute, a 'phantom vehicle' that forces the insured off the road without touching them may be denied — though many states have softened this by case law or statute.

Stacking

• Intra-policy stacking — combining the UM/UIM limits of multiple vehicles on one policy.
• Inter-policy stacking — combining limits across two or more separate policies.

Stacking is permitted in states such as Pennsylvania and Florida (usually with an additional premium and a written stacking election) and is prohibited or restricted in states such as California and New York. State law, not the PAP itself, controls.

Written Rejection and Other Rules

UM (and frequently UIM) must be offered at limits equal to the policy's liability limits. To buy lower limits or to reject the coverage entirely, the named insured must sign a written rejection. Without a valid signed rejection on file, courts in most states read UM coverage into the policy at the full liability limits.

Other tested Part C rules:

• A consent-to-settle clause bars the insured from settling with the at-fault driver in a way that destroys the insurer's subrogation rights without the insurer's consent.
• Disputes over the insured's legal entitlement or the amount of damages are resolved by arbitration in many states.
• Part C is excess over Part B Medical Payments and over PIP.

Worked Example: UM When the Other Driver Has Nothing

A covered insured is struck by a driver who let his policy lapse, so he carries zero liability coverage. The insured's proven bodily-injury damages are $70,000, and the insured carries 100/300 UM limits. Because the at-fault driver is truly uninsured, the UM (not UIM) limb responds, and it pays the full $70,000 — there is no offset to subtract because the at-fault driver's insurer paid nothing. Contrast UIM: if that driver had carried 25/50 limits, his insurer pays $25,000 first, and the difference-in-limits UIM pays the remaining $45,000.

The single most common UM/UIM error on the exam is confusing the two limbs: UM = no coverage at all; UIM = some coverage but not enough.

Why the Written Rejection Rule Matters So Much

State insurance codes treat UM as protective coverage the public should have, so they place the burden on the insurer to offer it at the liability limits and to document any rejection or reduction in writing. The practical effect is dramatic: if an agent forgets to obtain the signed rejection, a court can later force the carrier to pay a UM claim at the full liability limits even though the insured never paid a UM premium.

Tie this to the own-uninsured-car rule: a vehicle the insured owns or has furnished for regular use can never be an uninsured motor vehicle, which blocks an insured from collecting UM on the policy for a second car they failed to insure. Finally, remember that stacking is a creature of state law, not the PAP form — Pennsylvania and Florida permit it (often with a separate written stacking election and added premium), while California and New York restrict or bar it, so the same fact pattern can produce different recoveries depending on the state named in the question.

Hit-and-Run and the Consent-to-Settle Trap

A hit-and-run is always handled as UM, because an unidentified driver is, for claims purposes, an uninsured one. The PAP and most statutes require the insured to report to police promptly (commonly within 24 hours) and to give the insurer a sworn statement. Where state law still requires physical contact, a 'phantom vehicle' that runs the insured off the road without touching the car may be denied — but many states have relaxed that rule by statute or case law, allowing corroborated no-contact claims.

The other recurring trap is the consent-to-settle clause: an insured who signs a release with the at-fault driver and that driver's insurer, without first getting the UM/UIM carrier's consent, can destroy the carrier's subrogation rights and forfeit the UIM claim. The correct sequence is to notify the UIM insurer, give it the chance to advance the settlement amount and preserve subrogation, and only then accept the at-fault driver's payment.

Finally, fix the payment order in memory: Part C is excess over Part B Medical Payments and over PIP, so those first-party medical coverages pay before UM/UIM fills the remaining bodily-injury gap. These procedural rules — prompt police reports, sworn statements, written rejections, consent to settle, and arbitration of disputed amounts — are tested as often as the dollar math, so treat Part C as both a coverage and a set of conditions.