When auto accidents occur, there is a fairly good chance that one or both of the drivers involved is either uninsured or underinsured. In other words, the drivers are likely to have either no insurance, or very low limits.
For the victim, it could mean little or no compensation for a serious injury. For the driver who caused the accident, it could mean personal exposure of assets. In addition, for an agent, it could mean liability for failing to advise an insured of the adequacy of coverage.
That is where uninsured and underinsured motorist coverage comes into play. These coverages are designed to fill the gaps where an at-fault driver�s coverage is lacking.
However, they are also the source of much misunderstanding in the insurance industry. Agents and other insurance practitioners need to understand the difference between the two types of coverage, how UM/UIM contracts are interpreted, and how to avoid liability for failing to advise clients regarding the adequacy of their coverage.
Uninsured motorist coverage is an option available under all automobile insurance policies issued in California. If the insured elects to purchase this coverage, the insurance company provides coverage to the insured for his or her claims for injuries and damages arising from a motor vehicle accident where the party at fault is either uninsured, or does not have enough insurance to provide full compensation for the injuries sustained.
WHAT YOU NEED TO KNOW
Insurance companies are for-profit businesses. For this reason, they have an incentive to pay you the lowest amount of compensation for your injuries that they can get away with. In attempting to persuade you to accept a "low-ball" settlement, some insurance adjusters will try to scare you by telling you that unless you accept the amount being offered, you will be required to participate in protracted and complicated arbitration proceedings. Sometimes they also will neglect to even tell you that you are entitled to damages for pain and suffering (often the largest damages component), in addition to compensation for your medical bills.
It is for this reason that many people pursuing claims under their uninsured motorist coverage retain an attorney to represent them and protect their interests. Now, it is true that if your insurance company disputes the worth of your uninsured motorist claim it can require you to participate in an arbitration proceeding before paying you anything. However, it also is the case that when an insurance company sees that an attorney is involved, it often agrees to pay a substantially higher amount than what was first offered, without even going through the arbitration process. If the insurance company still refuses to pay full value on your claim, however, the attorney will then demand arbitration on your behalf and pursue the claim in an arbitration hearing. An experienced attorney is often able to obtain top dollar for his client in an arbitration proceeding.
The law requires minimum liability insurance coverage of $20,000 for one individual and $40,000 for more than one individual for bodily injury or death and $10,000 for property damage. However, some individuals get their license plates each year by paying the minimum insurance premium and then letting the coverage lapse for nonpayment. This is one reason why the risk of encountering an uninsured driver is so high.
Uninsured motorist coverage (UM) was designed to provide a source of recovery when a driver without insurance causes harm. With UM coverage, the insurer pays the insured the damages the insured would have recovered had the other driver been insured, subject of course to the UM policy limit. Underinsured motorist coverage (UIM) goes one step further, allowing the insured victim to recover from his or her insurer damages sustained in an accident with an underinsured driver, or, put another way, a driver who has inadequate coverage to compensate for the injuries that are caused.
To recover under an uninsured motorist policy, the claimant must show that the other driver was: 1) uninsured; and 2) legally at fault. If the claimant would not have been able to recover damages from the other driver, he or she will not be entitled to UM coverage.
To recover under an underinsured motorist policy, the claimant must first recover the full policy limit from the other driver. This precludes the claimant from accepting an amount less than the other driver�s policy limit as a settlement.
Claimants should also note that they need the permission of the underlying UM/UIM carrier to settle with the wrongdoer, even when the wrongdoer is offering the full policy limits.

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