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What Does Underinsured Motorist Mean? (Ultimate UM Guide)

People commonly ask, “what does underinsured motorist mean?” The term, “underinsured motorist,” is defined by your insurance contract. In most Florida insurance contracts, Underinsured Motorist means the at-fault party doesn’t have enough, or adequate, insurance to fully compensate you for your losses and injuries caused by their negligence.

For example, let’s assume there is a catastrophic injury case where the at-fault person only has low bodily injury insurance limits of $10,000. If the victim’s medical bills exceed the $10,000 limits, you are dealing with an underinsured motorist.

 

It’s called underinsured motorist because the at-fault driver’s policy limits are not enough to cover your damages.

 

Do You Need to Have High Medical Bills to Bring a UM Claim?

The answer is no. There are some underinsured motorist cases where the medical bills are quite low. However, the damages are catastrophic. Here’s an example. Imagine a car crash that caused a person to lose their vision. Although the medical bills from sudden blindness may only be $20,000, the loss of quality of life of the blind person would clearly exceed millions of dollars.

With underinsured motorist coverage on your policy, you are protected up to your policy limit amount. For example, if your injury case is worth $50,000, and the at-fault driver only had $10,000 in bodily injury coverage, you would be underinsured by $40,000.

 

How Does Underinsured Motorist Coverage Work?

If you had an underinsured motorist policy with $100,000.00 in coverage, then your UM should pay $40,000.00 to bridge the gap. In this scenario, the BI (bodily injury) limits of $10k, plus $40k from your underinsured motorist policy would make you whole again.

However, if you only had $25,000.00 in UM coverage, then you would end up $15,000 short of a full recovery. Having adequate underinsured motorist coverage will protect you from drivers who are underinsured.

 

Is there a Difference between Uninsured and Underinsured Motorist Coverage?

Not really. Especially in Florida. “Underinsured Motorist” just acknowledges the at-fault driver had some bodily injury insurance. But, not enough to cover all of your damages. When the at-fault driver has some insurance, it may decrease the risk exposure of your insurance company.

When there is underlying bodily injury insurance coverage, your insurance company knows they will only pay after the BI (bodily injury) insurance carrier pays, in most cases. This makes Underinsured Motorist insurance less expensive to sell.

 

Are there Separate Policies for Uninsured and Underinsured Motorist Coverage?

In Florida, there is not a separate policy for underinsured motorist coverage. When you purchase underinsured motorist insurance, it covers both uninsured and underinsured at-fault drivers.

However, in other states, they may sell separate policies for uninsured and underinsured motorist insurance. Which means they would only pay benefits if you are injured by the uninsured or underinsured driver.

If you Receive Less than 100% of the BI Policy Limits from the At-Fault Driver, Can You Still Make an Underinsured Motorist Claim?

In other words, if you don’t get all of the bodily injury money, are you still able to make an underinsured motorist claim? In Florida, the answer to this question is yes. If you don’t collect the entire policy limits from the at-fault driver, you can go after your own insurance company to recover your underinsured motorist benefits. You must have an underinsured motorist insurance policy to do this.

However, your underinsured motorist carrier doesn’t have to pay anything that was already paid by the at-fault driver’s bodily injury policy. Why? Imagine the at-fault party has bodily injury policy limits of $100,000. Then your personal injury lawyer attempts to settle your claim. The at-fault insurance company replies, “We realize your claim is worth more than $100,000, but we are only offering you $95,000.”

If you want the other $5,000, but the bodily injury insurance company says, “You will have file a lawsuit for $100,000. But we will pay you $95,000 today.” Then you and your personal injury lawyer may decide it’s better to accept the $95,000 and leave the UM insurance company out of it.

 

Do You Have to Sue Your UM Company When You Sue the At-Fault Insurance Company?

No. In Florida, you can bring your uninsured motorist lawsuit after the bodily injury case. As long as you file it within the five-year statute of limitations for underinsured motorist claims. If you would like to read an in-depth article about personal injury statutes of limitations in Florida that may affect your case, click here to read my guide.

 

When is it a Good Strategy to Leave Your UM Insurance Company Out of a Lawsuit?

It might be a good strategy to sue the at-fault parties and leave out your underinsured motorist insurance. When you do this, you have one less insurance defense attorney to deal with in the litigation process. If you win big against the at-fault parties and exceed their policy limits, you still may be able to recover the amount over the policy limits from your UM insurance policy since they failed to settle the case with you fairly.

After you win a trial against the at-fault parties, your UM insurance may become inspired to negotiate and settle your UM claim without a fight.

 

Example of How UM Insurance Responds to Certain Underinsured Motorist Claims:

This is a case where a young man was killed in a tragic crash. The at-fault driver only had $100,000 in bodily injury coverage. While the young man’s family had $500,000 in underinsured motorist coverage. The case went to trial and the jury found the deceased young man 100% at fault for the crash. So he received nothing.

The family’s UM insurance thought they were in the clear. But, the personal injury lawyers for the family filed a second lawsuit against the UM carrier. Despite the loss of the first case at trial, the UM carrier paid to settle the second claim. Even though they did not recover anything in the first trial.

 

Why? Because the Family Still Had a Valid Underinsured Motorist Claim:

The law prohibits the family’s personal injury lawyer from using the first trial as evidence in the underinsured motorist insurance case. In fact, every UM insurance policy I have read says that, unless the UM carrier is in the claim defending themselves, they won’t be bound by any other court action. Therefore it goes both ways.

Neither the client nor the UM insurance company is bound by any judicial determination unless the UM carrier was a party to that specific claim.

 

Underinsured Motorist Insurance Interpretation is Different in Each State

Different states have different interpretations of underinsured motorist insurance policies. In some states, the law says if the at-fault person meets the minimum insurance requirements of their state, then they are not underinsured.

Some states and insurance policies say that if the at-fault person’s bodily injury insurance is more than or equal to your underinsured motorist insurance coverage, then the at-fault person is not underinsured. Therefore you can’t make an underinsured motorist insurance claim.

 

Some States Reduce Your Underinsured Motorist Limits by the At-Fault Driver’s BI Limits:

Some states have insurance policies that reduce your UM insurance policy limits by the at-fault BI limits. For example, let’s say you have $1,000,000 of underinsured motorist insurance in another state. The policy says your UM insurance limits are the at-fault driver’s bodily injury limits minus your UM.

If the bodily injury limits are $300,000, then your Underinsured Motorist benefits are reduced by $300,000. So, you could only recover $700,000.00 from your UM carrier. The$1,000,000 UM policy minus the $300,000 in bodily injury limits leaves with $700,000.

In Florida, You Add Your Underinsured Motorist to All the BI Coverages

In my law practice, we oftentimes represent car accident victims that live outside the state of Florida. These cases require careful review of the out of state insurance policies to figure out what coverage is available. We also need to find out if there are any special requirements. Sometimes certain things must be done to make a claim for underinsured motorist benefits.

 

What are Important Things to Know Before Settling with BI Insurance?

There are some important things you need to know about a car accident before you settle with the at-fault person’s bodily injury insurance company. You need to know about all of the potential or possible insurance policies that may be available to you. There could be more than one UM insurance policy to cover you.

If you or your family has stacked UM coverage, you might consider a potential claim with your insurance company. If you’re in someone else’s vehicle, the driver may have another UM policy. This would provide additional coverage to you.

Or, if you are in a work vehicle, your employer might have UM coverage that would also be available to you. In some cases, I have had multiple UM policies that provided benefits to my clients.

This is why you need to know about any and all insurance policies before settling any claims requiring a signed release.

What Happens if You Sign a Release without Permission from a UM Insurance Company?

If you sign a release without obtaining permission from a UM insurance company, you will waive your right to make a recovery from them.

What Happens if You were Insured the Day of the Accident, then Canceled the Policy Later?

What happens if you were in an accident on January 1, 2016. Then decide to change or cancel your car insurance policy one month later. Does this affect your claim? The answer is no.

Your insurance company protects you as long as you were insured on the date of the loss. So, if you change companies after a loss, your original insurance company still has all the duties and obligations to protect you. You should be covered even though you are not insured with them any longer.

 

Does the Value of Your UM Claim Change Based on Low BI Limits?

After you bring a lawsuit against your UM carrier and the jury renders a verdict, the Judge will convert the verdict into a Judgment. But before the final judgment, the judge will subtract any amount of money paid to you by the at-fault person’s insurance company from the verdict.

The judge will also look at how many UM policies are available. Depending on where the UM insurance policies come from and how they relate to each other, the judge may deduct in order of UM policies all amounts paid to the injured person.

However, in some cases, the UM has to share the burden of paying the claim on a pro-rata basis. For example, assume one UM policy is $500,000. The other one is $50,000. Both of them are pro-rate policies. Then each insurance company would pay their fair share.

If the judge needed to award $100,000 to the injured victim, the smaller insurance policy would owe $10,000 and the larger policy would owe $90,000.

What Happens if You Have UM and there is Huge BI Limits?

What happens when you have UM insurance and the at-fault person has huge bodily injury insurance limits? For example, assume you were involved in a car crash with a commercial motor vehicle. They carried $1,000,000 in bodily injury insurance. Your damages and injuries are less than the $1,000,000 policy limits.

Do you Have to get Permission from Your UM Insurance to Settle with the At-Fault Insurance Company?

No, you don’t have to get permission from your UM insurance company when you take less than the policy limits. As long as you don’t plan on ever making a UM claim. You only need their permission to settle with the underlying insurance company when you want to protect your rights to make a UM claim.

 

Real Life Example of How Insurance Defense Lawyers Try to Trick You:

Here is a real-life example of how an insurance defense lawyer tried to trick the plaintiff.

Our client had serious injuries caused by a commercial driver. The at-fault party had a one million dollar insurance policy. Our client had a UM policy with $10,000 in coverage. The good news was, our client’s injuries weren’t too serious. So their claim would never exceed the $1,000,000 coverage.

However, the sneaky Insurance Defense lawyer called our clients’ UM carrier. The Defense lawyer told the UM carrier to schedule an Examination Under Oath (EUO, a lengthy deposition of our client.) He also asked for a Compulsory Medical Examination (CME) of our client with a well-known insurance defense doctor.

The Insurance Defense Lawyer agreed to pay the UM carrier for the EUO and the CME. So our client’s UM carrier sent us notice of the defense’s desire to depose and examine our client. We discussed this request with our client.

We realized the UM carrier knew the damages caused by this accident would never exceed the bodily injury limits. So we decided to prohibit our client from attending the EUO and CME.

We knew we would waive any potential UM claim by doing this. However, it was in our client’s best interest to forgo the deposition and examination. The insurance companies colluded together by gathering evidence they weren’t entitled to. We knew the Insurance Defense lawyer was just trying to double-up on evidence. So, we protected our client by waiving any potential UM claim.

 

Have More Questions About Underinsured Motorist Insurance?

If you have any more questions about underinsured motorist insurance, please feel free to call me. My name is Matt Powell and I am a Board Certified Civil Trial Lawyer. I have been helping injured victims and their families for over 25 years. Call my office at 1-844-MATTLAW and I would be glad to speak with you.