Overview of Underinsured/Uninsured Motorist Coverage

Because a substantial number of owners and operators of cars and trucks in the United States fail to maintain adequate insurance coverage or operate their vehicles without any insurance coverage at all, many motor vehicle insurance policies contain provisions for underinsured motorist coverage, sometimes abbreviated UIM, or uninsured motorist coverage, sometimes abbreviated UM. The intent of such provisions is to give persons insured under auto insurance policies and innocent third persons some of the insurance protection they would have enjoyed if the underinsured or uninsured motorist with whom they are involved in an accident had maintained adequate insurance coverage on an uninsured or underinsured vehicle.

Underinsured motorist or uninsured motorist provisions in auto insurance policies generally state that an insurer will provide up to a specified amount of coverage for the benefit of an insured or a third party within the class of persons included in the coverage, if such an individual suffers damages as the result of an accident with a vehicle that comes within the definition of an underinsured vehicle or uninsured vehicle for purposes of the policy. Legal issues that can arise from the system of underinsured motorist coverage and uninsured motorist coverage include the mandatory or voluntary nature of the coverage; the permissibility of “stacking” underinsured or uninsured motorist coverages on more than one vehicle or policy to increase coverage that would otherwise be inadequate to fully compensate a party entitled to receive benefits under such coverage; the effect of consent to settle clauses, which prohibit an insured from obtaining a legal judgment against or a settlement from an underinsured or uninsured driver without the consent of the insurer; and the nature and extent of the insurer’s subrogation right, which permits an insurer that has paid out benefits under the underinsured or uninsured motorist provision of a policy to take legal action against the underinsured or uninsured driver in an attempt to recover some or all of the amount it has paid out under the policy.

The business of insurance in the United States, including that of motor vehicle insurance, has traditionally been governed by the individual laws of each state rather than by a single unified body of federal law. As a result, the legal standards governing underinsured motorist coverage and uninsured motorist coverage vary from state to state, and will be found in state statutes regulating the business of insurance, and in the decisions of courts dealing with issues related to insurance law.