Underinsured Drivers and Car Accidents


When a driver chooses to carry the minimum insurance coverage required by law, or where injuries which result from an accident are particularly severe, they may not have adequate insurance coverage to adequately compensate their victims in a car accident. Even where policy limits are reasonably high, an accident involving multiple claimaints can result in insufficient coverage for each injured individual.

Liability Beyond Policy Limits

A driver who has insufficient insurance coverage, but has personal assets that might be recovered following an accident, puts those personal assets at risk. In most states, if there is an unsatisfied judgment arising from an automobile accident, the at-fault driver will not be able to renew his driver's license until the judgment is paid. The debt resulting from a car accident can force some drivers into bankruptcy.

Drivers who have significant personal assets should obtain insurance coverage with a higher policy limit. They should also consider obtaining umbrella coverage, a type of insurance that covers many claims that exceed the limits of or fall outside of the scope of other insurance policies, to provide insurance coverage in those rare circumstances when their regular insurance policies prove inadequate.

Difficulty Recovering Adequate Damages

The easiest way to collect damages following an automobile accident is through the other driver's insurance company. Unfortunately, when a driver is uninsured even a settlement offer for the maximum amount of the policy will be inadequate to compensate the victim or victims of an accident. When that occurs, it is important to explore other possible sources of recovery.

  • Going Beyond The Policy Limits - In automobile negligence litigation, personal injury lawyers tend to be reluctant to pursue a defendant's personal assets beyond the limits of insurance coverage. It is often difficult to collect the portion of a judgment that exceeds the policy limits. While an insurance company will simply write a check, individual defendants are never eager and are often unable to pay a significant judgment. To collect a judgment payable by an individual defendant, that defendant's personal assets must be tracked down and then additional measures must be taken to collect against them, often with considerable constraints under state law. Further, even when a judgment is obtained against an individual, it is subject to being discharged in bankruptcy such that the additional time and cost of obtaining the higher verdict goes to waste. Before making the decision to pursue damages beyond the policy limits, it makes sense to ensure that the defendant is collectable - that is, that it will be possible to recover the damages recovered.

  • Underinsured Motorist Coverage - Some insurance companies offer policy provisions to compensate accident victims who cannot obtain adequate damages through the at-fault driver's policy, through underinsured coverage. Not all insurance companies offer uninsured motorist coverage, and many which offer such coverage won't inform drivers of the option unless asked, so most drivers do not have this type of coverage on their policies.

Although it is usually difficult to recover compensation beyond the policy limits from an individual driver, sometimes it is possible to find other avenues of recovery. For example:

  • Additional Insurance Coverage - Although the at-fault driver's auto insurance coverage may be inadequate, sometimes the same vehicle will be covered by more than one insurance policy, or the at-fault driver will have additional coverage through a separate policy, such as an umbrella policy, that may be reached to provide additional compensation.

  • Additional At-Fault Parties - Sometimes an additional person or business will also be liable for injuries caused in an accident, and it may be possible to make a claim with their insurance or to pursue their assets to obtain compensation for damages beyond the at-fault driver's coverage or ability to pay. For example, the person who causes an accident may be performing deliveries for an employer at the time of the accident, and it may be possible to establish that the employer shares liability for the accident.

  • Significant Personal Resources - Some drivers who carry inadequate insurance coverage nonetheless have significant personal assets or significant sources of income, and it may be able to obtain a settlement or to collect a judgment against those resources without concern about bankruptcy.

Making an Underinsured Motorist Claim

If you have underinsured motorist coverage through your own auto insurance policy, the process of making a claim for that coverage will be governed by your insurance policy. Your policy will include a time limit for opening a claim, and the deadline for making a claim may be very short. Even if you are not initially certain that you will need to make an underinsured motorist claim, you may not initially understand the extent of your injuries or be aware of the extent of the at-fault driver's insurance coverage. Make sure you comply with reporting requirements so that you do not compromise or lose your ability to later make a claim.

When you obtain underinsured motorist coverage, you decide how much coverage to purchase and the amount you may obtain will not exceed the amount of coverage you obtained to cover claims made against you in the event of an accident. If you purchase a maximum of $100,000 in coverage for negligence claims made against you, your underinsured motorist coverage will be limited to $100,000 less the amount you are able to recover from the at-fault driver.

An uninsured motorist claim proceeds alongside your claim against the at-fault driver. Your insurance company will verify that the at-fault driver's insurance coverage was exhausted and, for any claim beyond the limits of that coverage, will investigate and verify the nature and extent of your injuries. Your insurance company may rely heavily upon what it learns through the litigation against the at-fault driver, but may also want to conduct additional discovery, examining your medical records, taking statements under oath, or having you examined by doctors it retains to evaluate your injuries and prognosis.

When your insurance company has completed its review of your claim, if it agrees that your underinsured motorist coverage applies to the accident and that the value of your injuries exceeds what you were able to recover from the at-fault driver, it will make an offer of compensation based upon its evaluation of your claim and your own insurance policy limits. If you do not find the offer from your insurance company to be acceptable, you may attempt to negotiate for a larger settlement. If you are unable to agree on a figure, you will have to pursue the dispute resolution process defined by your insurance policy. Typically, your insurance policy will require that any claim that cannot be resolved through negotiation must be submitted to binding arbitration, a process that is in some ways similar to litigation but where the case is heard by a private arbitrator or panel of arbitrators and from which the right to appeal is very limited.

Copyright © 2006 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on Jul 8, 2016.