What Is Underinsured Motorist Coverage and Why Is It Important?

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Time to pour some hot cocoa, start a fire, and sit down to read the latest installment of the Gerstner Law blog.  This month, I’m going to discuss underinsured motorist coverage.

In the last two posts, we’ve discussed liability insurance coverage and uninsured motorist coverage.  Liability insurance covers personal injury to others when the insured causes an auto accident, and uninsured motorist covers your damages if you are hurt by a driver that doesn’t have insurance.  What happens if you’re injured in a car accident by a driver that has liability coverage, but your damages exceed the at-fault driver’s limits? In that situation, hopefully, you have underinsured motorist (“UIM”) coverage to help pay for your damages.

UIM coverage applies when an at-fault driver’s liability limits are not high enough to cover all of your damages after a car accident.  With limited exceptions, an insurance company can only be forced to pay up to the policy’s limits. Underinsured motorist coverage will come into effect when the at-fault driver’s liability limits are exhausted.  After that, your UIM coverage will pay for your damages up to your own policy’s limits.

It’s not hard to imagine cases where a victim needs UIM coverage to be made whole, especially given the current state of Montana law.  In Montana, a driver only needs to carry limits of $25,000 per person/$50,000 per occurrence in liability coverage. That amount has not been updated in decades, and nowadays it seems that you can’t even walk down a hospital hallway for less than $25,000, much less receive any significant amount of medical care.

Like uninsured motorist coverage, UIM coverage is “personal and portable.”  That means that if you have UIM coverage, you’re covered if you’re hurt in a crash even if you aren’t driving your car.  Your UIM coverage will apply even if you are injured in somebody else’s car or hit while walking on the sidewalk.

Another nifty aspect of UIM coverage is that it not only covers you while you’re driving your car but also any of your car’s occupants.  Like other insurance coverages, UIM limits are issued on a per person/per occurrence basis. For example, if somebody has $50,000 per person/$100,000 per occurrence UIM limits, the underinsured motorist insurer will only cover damages beyond the at-fault driver’s liability limits up to $50,000 per person injured in the crash, and $100,000 total per crash, no matter how many people are hurt.  Using the $50,000 per person/$100,000 per occurrence example, if the victim’s car had three or more occupants and they all suffered significant damages beyond the bad driver’s liability limits, the injured parties will have to somehow divide the $100,000 per occurrence limit.

To show how UIM coverage applies, I will describe two scenarios where it will help cover a victim’s damages.  First, imagine Cyclist Carl is riding his road bike on Highway 302 on his way to Molt. Coming the opposite way is Hunter Hank driving his truck with a huge bull elk in the bed.  Hank is in the middle of posting the picture of himself posing with the elk on Facebook when he inadvertently swerves across the centerline and hits Carl head on. Carl is launched off of his bike, bounces off of Hank’s truck’s windshield, and flies through the air until he lands in the bed of the truck.  When Carl regains consciousness, he finds himself hugging the dead elk. Hank only carries the legal minimum in liability limits, which is spent on just the ambulance and Carl’s first night in the hospital. Lucky for Carl, he has UIM coverage on his vehicles, which will start to cover his damages after Hank’s liability insurance limits are exhausted.  As mentioned above, underinsured motorist coverage is personal and portable, and covers you even if you aren’t driving your car.

For the next example, imagine Rancher Rick is driving his truck with his good friend Farmer Frank riding shotgun near Red Lodge, Montana.  Rick has UIM coverage, and Frank also has UIM coverage for his own rig. Rancher Rick knows that Highway 212 is full of maniac drivers, so he is carefully driving the speed limit.  Meanwhile, Speedy Sam is driving the same direction and begins approaching Rick’s truck from behind. Sam just cut down his Christmas tree, and everybody knows that it takes a lot of hot chocolate and peppermint Schnapps to find and cut down the perfect tree.  Unfortunately, Sam decides to drive home drunk. Because he is impaired, Sam crashes his car into the back of Rick’s truck. Rick and Frank are airlifted to a Billings hospital, and they both suffer significant damages. If Rick’s damages exceed Sam’s liability limits, his UIM coverage will pick up where Sam’s insurance leaves off, up to Rick’s UIM limits.  In this scenario, Frank has three avenues of recovery. He first can recover from Sam’s insurance company. Then he can recover both from his own and Rick’s UIM coverages. Remember that UIM is portable, so it covers you even if you’re in somebody else’s vehicle.

Of course, my hokey examples can oversimplify things and omit other potential avenues of recovery, such as medical payment coverage (which we haven’t discussed yet).  If you or somebody you know has been injured in a crash, you need a personal injury lawyer on your side to sort through the issues. Gerstner Law has experience with car accident cases, and we work hard to maximize our clients’ recoveries.  Contact us today and let us shoulder the burden of dealing with the insurance companies.