Assessing a UM/UIM Case, pt. 3: Is the vehicle uninsured/underinsured?


In this article, we will be discussing the various ways in which insurance companies define uninsured (“UM”) and underinsured (“UIM”) motor vehicles.

On their surface, these terms are defined exactly as you would expect them to be: land motor vehicles that are a) not covered by a liability insurance policy or b) are covered by insurance but with limits that are not enough to pay the full amount the covered individual is legally entitled to recover as damages. If you dig a little deeper, however, you will realize that these are loose definitions that are open to interpretation.

When is a vehicle uninsured?

As it relates to UM/UIM claims, “uninsured” has more than one meaning: A vehicle may have no valid insurance, or the liability carrier may have denied coverage. If the liability carrier denies coverage, the tortfeasor – and, by extension, the vehicle – is considered uninsured, and your own UM coverage comes into play.

Inaction or a delay in making a decision on the part of the covering insurance company may be taken as evidence of denial in coverage. Similarly, a reservation of rights or suit for declaratory judgment may also constitute evidence of denial, in the proper case.

In addition to an insurance carrier denying coverage, another instance in which a vehicle may be considered uninsured is in the case of a hit-and-run. Here, specific requirements must be met. In Texas, there must be contact (or evidence of contact) between the insured vehicle and the hit-and-run vehicle. An example of contact would be if Car A hits the insured Car B, and Car A subsequently leaves the scene of the accident. Here, the “contact rule” would be satisfied.

What is NOT considered contact?

  • Blinding lights running a driver off the road
  • An axle falling off a vehicle and striking the insured vehicle
  • Ice falling off a trailer and striking the insured vehicle

If a vehicle’s license plate number is obtained and the owner can be identified, it is not a hit-and-run under the policy.

When is a vehicle underinsured?

A case in which a vehicle is considered underinsured would be when the tortfeasor has valid insurance, and his or her carrier has not denied the claim, but his or her bodily injury liability coverage limits and/or property damage coverage  limits are not enough to cover the plaintiff’s damages.  This is known as the limit to damage analysis.

Moving Forward

As you may have gathered, these definitions are important, and confusion over them can lead to a UIM claim being filed either when it is unnecessary or improper. And while claims in either instance can always be denied, there is a chance they could lead to litigation. Ultimately, a jury will decide what a party is legally entitled to recover. However, your job will be to assess what that party can potentially recover. What is the damage to the vehicle, past and future medical expenses, loss of earning capacity, physical impairment, physical pain and mental anguish? Compare this amount to what the plaintiff may be awarded by a jury. If the difference between the two is very large, approving the claim may be the wiser option.

In our next article, we will take a look at stacking policies to increase your coverage.