6.4 Part C Uninsured/Underinsured Motorists

Part C: Uninsured Motorists Coverage

Part C pays compensatory damages that a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury caused by an accident. The crucial concept: Part C steps into the shoes of the at-fault uninsured driver. The covered person must be able to prove the other driver was legally liable; if no one is at fault or the insured was entirely at fault, there is nothing to recover under UM. Many states also provide uninsured motorists property damage (UMPD), though the standard ISO base form is primarily a bodily-injury coverage.

What is an "uninsured motor vehicle"

The PAP defines an uninsured motor vehicle as one:

• To which no bodily injury liability policy applies at the time of the accident; or
• To which a liability policy applies but the insurer denies coverage or is or becomes insolvent; or
• That is a hit-and-run vehicle whose operator or owner cannot be identified and that hits (or, in some states, has physical contact with) the covered person or covered auto.

It is not an uninsured vehicle if it is: owned or operated by a self-insurer; owned by a government unit; or owned by or furnished for the regular use of you or a family member (you cannot collect UM from yourself).

Underinsured motorists (UIM)

Many states add or require Underinsured Motorists (UIM) coverage, typically by the PP 03 11 or a state-specific UIM endorsement. An underinsured motor vehicle is one whose BI liability limit is less than the damages the covered person is entitled to recover - in some states, less than the injured person's own UIM limit. UIM fills the gap between the at-fault driver's inadequate liability limit and the insured's UIM limit.

UIM worked example (difference vs. excess states)

Assume the insured suffers $100,000 in damages, the at-fault driver carries $25,000 BI liability, and the insured carries $100,000 UIM.

• Difference-in-limits (offset) states: UIM pays the insured's limit minus the at-fault limit = $100,000 - $25,000 = $75,000, plus the $25,000 from the at-fault carrier, for $100,000 total.
• Add-on (excess) states: the insured collects the $25,000 liability plus the full $100,000 UIM, but recovery is still capped at actual damages of $100,000, so UIM pays $75,000 here as well once damages cap the total.

Trap: when damages exceed the combined coverage, the offset vs. add-on distinction changes the math - know which approach your state uses.

Limits, stacking, and offsets

UM/UIM limits are stated like liability - either a CSL or split limits (per person / per accident). Two tested concepts:

The PAP contains anti-stacking and "non-duplication" language so the insured is not paid twice for the same element of loss across Part A, Part B, and Part C.

Required offer and rejection

Most states require insurers to offer UM (and often UIM) coverage at limits at least equal to the policy's liability limits. The insured may usually reject or select lower limits only in writing. If no valid written rejection exists, courts in many states will read UM/UIM into the policy at the full liability limit by default.

Arbitration: Part C contains an arbitration provision - if the insurer and the covered person disagree on whether the person is legally entitled to recover or on the amount of damages, either party may demand arbitration. This is a frequent exam point distinguishing UM disputes (resolved by arbitration) from ordinary liability suits.

Why UM/UIM matters

Liability minimums in many states are low - financial-responsibility floors such as 25/50/25 are common - while medical and wage-loss damages from a serious crash routinely run into six figures. UM/UIM is the coverage that protects the responsible, insured driver from the irresponsible, uninsured or underinsured one. It is first-party in the sense that the insured collects from his own carrier, yet it is fault-based because the insured must still prove the phantom or uninsured driver caused the injury and the amount of damages. That blend is exactly what makes Part C distinct from both Part A liability and Part B Med Pay.

Hit-and-run and physical-contact rules

The hit-and-run scenario is heavily tested. A phantom vehicle that flees can be an uninsured motor vehicle, but many states and policy forms require physical contact with the covered person or covered auto to prevent fraudulent "a car ran me off the road" claims. Some states relax this and allow recovery with independent corroborating evidence. Practical exam tip: if the fact pattern says the at-fault car never touched the insured and there are no witnesses, the claim likely fails the physical-contact requirement in a strict-contact state - a common trap distinguishing payable from non-payable UM losses.

UM vs. UIM and the Wisconsin Requirement

Part C pays the covered person for bodily injury caused by an uninsured or underinsured motorist when that motorist is legally liable. Uninsured motorists (UM) responds when the at-fault driver has no liability coverage (or is a hit-and-run); underinsured motorists (UIM) responds when the at-fault driver has some coverage but less than the insured's damages.

Wisconsin makes uninsured motorists bodily injury mandatory at 25/50 and requires insurers to offer underinsured motorists coverage, which the insured may reject in writing. A worked UIM example: the insured suffers $100,000 in injuries; the at-fault driver carries only $25,000. Under a difference-in-limits approach, the insured's $100,000 UIM responds for the gap after the $25,000 is applied, subject to the UIM limit, so a $100,000 UIM limit can bring the total recovery up to $100,000.