What Happens If I Get Injured in an Accident with an Underinsured Driver?

The answer lies in your own insurance policy, specifically your Underinsured Motorist (UIM) coverage. However, to access these funds, there is a strict legal hierarchy you must follow. If you do things out of order, such as settling with the at-fault driver without getting written permission from your own insurance carrier first, you may permanently destroy your right to collect additional compensation.

Insurance adjusters frequently rush to offer you their policy limits to close the case. Taking that check without legal counsel could be a devastating procedural error. 

At Reiner & Frankel, LLP, we step in to ensure the order of operations is followed correctly, protecting your right to a full financial recovery. If you’ve been in an accident with an underinsured driver, contact us today for a free consultation.

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California’s Liability Limits (SB 1107) Explained

For decades, California drivers were only required to carry $15,000 in bodily injury liability coverage per person. It was a number that hadn’t changed since the 1960s, completely failing to keep pace with modern medical inflation.

Senate Bill 1107 changed this. Recently, the minimum liability limits in California have increased to $30,000 for injury or death to one person, and $60,000 for injury or death to more than one person (30/60). While this increase certainly helps, you must look at it in the context of serious injury costs.

Consider the cost of healthcare in Redding and Northern California. If you suffer a compound fracture, a torn ligament requiring surgical repair, or a moderate traumatic brain injury, the bill for the emergency room alone might consume that entire $30,000 limit. That leaves nothing for physical therapy, lost wages, pain and suffering, or future medical care.

The Definition of Underinsured

Many people confuse uninsured with underinsured. They are legally distinct concepts that trigger different parts of your policy.

• An uninsured driver has no insurance at all.
• An underinsured driver has a valid insurance policy, and their insurance company is willing to pay. The problem is that their policy limit is lower than the value of your injury claim.

In rural areas like Shasta and Tehama counties, accidents commonly occur at highway speeds. The force of impact in these collisions typically results in damages that far outstrip minimum policy limits. You might have $150,000 in valid damages, but the at-fault driver only has $30,000 in coverage. That $120,000 difference is the gap your UIM coverage is designed to fill.

The moment you realize the other driver’s limits are insufficient, the legal strategy must shift. You stop treating the at-fault driver’s insurance as the primary source of recovery and start looking at your own policy provisions.

Triggering Your Underinsured Motorist (UIM) Coverage

California Insurance Code Section 11580.2 imposes a strict requirement known as exhaustion. You can’t just simply call your agent and ask for a check because the other driver didn’t have enough money.

Before your insurance company owes you a dime in UIM benefits, you must collect the full policy limits from the at-fault driver (or the maximum amount they have available). However, there is a catch.

The Permission to Settle Trap

Most insurance policies contain a clause regarding subrogation rights. Basically, when your insurance company pays you, they inherit the right to sue the at-fault driver to get their money back. If you sign a liability release with the at-fault driver, you legally cut off your insurer’s ability to sue them later.

If you sign that release without asking your insurer first, your insurer may deny your UIM claim entirely. They will argue that by releasing the at-fault driver, you prejudiced their rights.

Here is the proper, safe sequence of events we manage for our clients:

• Step 1: The Tender. We demand the at-fault driver’s insurance carrier pay their full policy limits. They agree and send a written offer (the tender).
• Step 2: Notice of Intent. We do not accept the money yet. Instead, we send a formal written notice to your UIM carrier. We inform them of the offer and ask for their written consent to accept it.
• Step 3: The Assessment. Your insurer has a window of time to decide. They will either grant permission to settle, or they will advance the money themselves to preserve their right to sue the other driver (though the latter is rare).
• Step 4: The Release. Once we have written permission from your UIM carrier, we can safely sign the release with the at-fault driver, take their check, and then proceed to open the UIM claim for the remaining balance.

The Mechanics of the “Offset”: How UIM Payouts Are Calculated

A common misconception is that UIM coverage stacks on top of the at-fault driver’s insurance. California law generally does not allow stacking.

Your UIM benefits pay the difference between your UIM limit and the at-fault driver’s liability limit. Your insurance company gets a credit (an offset) for every dollar the at-fault driver’s insurance pays you.

Scenario A: The Positive Outcome

Imagine you have substantial UIM coverage on your own policy, for example, $100,000. You are hit by a driver with the state minimum of $30,000.

Your injuries are valued at $80,000.

• The at-fault driver pays you $30,000.
• Your UIM coverage limit is $100,000.
• Your insurer subtracts the $30,000 you already received.
• This leaves $70,000 in available UIM funds ($100,000 – $30,000).
• Since your remaining damages are $50,000 ($80k total – $30k paid), your UIM pays the remaining $50,000.

Scenario B: The Zero Recovery

Imagine you only carry the minimum UIM limits of $30,000. You are hit by a driver who also has $30,000 limits.

• The at-fault driver pays you $30,000.
• Your UIM limit is $30,000.
• The offset calculation is: $30,000 (Your Limit) – $30,000 (Their Payment) = $0.

In this scenario, even though your damages might be $100,000, you cannot collect anything from your own UIM policy because your limits do not exceed the at-fault driver’s limits. This underscores why we always advise clients to carry UIM limits that are higher than the state minimums to ensure you have access to funds after a severe car accident. These funds cover both economic damages (medical bills, lost income) and non-economic damages (pain, suffering, loss of enjoyment of life). However, the total payout will never exceed the specific dollar amount listed on your declarations page, minus the offset.

Procedural Pitfalls That Can Destroy Your Claim

Underinsured motorist claims operate under different rules than standard personal injury lawsuits as well.

Statute of Limitations Differences

For a standard car accident lawsuit in California, you generally have two years from the date of the accident to file suit. However, because a UIM claim is a contract dispute between you and your insurer, the trigger for the statute of limitations can vary.

Generally, you must either resolve the UIM claim or formally institute arbitration proceedings within two years of the accident. There are exceptions if you have not yet resolved the claim with the at-fault driver, but relying on exceptions is risky. We prefer to file the necessary demands well ahead of schedule to prevent any argument that the claim is time-barred.

The Arbitration Requirement

If you and your insurance company cannot agree on what your claim is worth, the case does not go to a jury trial. Instead, it goes to binding arbitration. This is a private legal proceeding where a neutral arbitrator (usually a retired judge or senior attorney) reviews the medical evidence and decides the value of the case.

Arbitration is faster than a trial, but it is final. You usually cannot appeal an arbitrator’s decision. This makes the preparation of your medical evidence vital. We must present a compelling case to the arbitrator that justifies the full value of your injuries.

Reporting Requirements

Regardless of fault, California law requires you to file an SR-1 Report of Traffic Accident with the DMV within 10 days if damages exceed $1,000 or anyone was injured. Furthermore, your own insurance policy requires prompt notice of any accident. If you wait months to tell your insurer about the crash because you thought the other driver would handle it, your insurer may deny coverage based on late notice.

Options When UIM Coverage Is Absent or Insufficient

Sometimes we review a client’s policy and discover they do not have UIM coverage, or the limits are too low to cover their medical needs. This is a difficult position, but it does not always mean the end of the road. We look for other avenues of recovery.

Asset Investigation

Insurance protects the driver’s assets. When insurance is exhausted, the driver’s personal assets are technically exposed. In many cases, drivers with minimum insurance have no assets to pursue because they are judgment-proof.

However, this is not always true. A business owner or property owner might carry low auto limits but have significant equity in real estate. We conduct asset checks to see if pursuing a personal judgment against the at-fault driver is a viable financial strategy.

Medical Payments Coverage (MedPay)

Check your policy for MedPay. This is a separate pool of money used specifically for medical bills. It is no-fault coverage, meaning you may use it immediately without waiting for a settlement. It can help cover deductibles and co-pays while the larger liability claim is being processed.

Health Insurance and Liens

If you have private health insurance (Blue Cross, Kaiser, etc.) or Medicare, they will pay your medical bills as they arise. This stops collections agents from calling.

However, these insurers will place a lien on your eventual settlement. They expect to be reimbursed for what they paid. A major part of our work at Reiner & Frankel is negotiating with these health insurers to reduce their lien amounts. By legally forcing them to share in the cost of procurement, we work to reduce the amount you have to pay back, putting more net money in your pocket.

Umbrella Policies

We also investigate whether the at-fault vehicle was being used for work or if the driver lives with a relative who might have an umbrella policy. Commercial policies typically have much higher limits than personal auto policies.

FAQ for Underinsured Motorist Claims in California

What If I Was a Passenger in Someone Else’s Car?

If you are injured while riding in a friend’s car, you actually have two layers of UIM protection. First, you claim against the driver’s policy for the car you were in. If that policy is exhausted or insufficient, you may then be able to claim against your own auto insurance policy, even though your car was not involved. The priority of which policy pays first is a complicated legal determination we handle regularly.

Does a Hit-and-Run Count as Underinsured?

No, a hit-and-run is typically classified as an Uninsured Motorist (UM) claim, not underinsured. California law has a specific requirement for this: there must be physical contact between the vehicles. If a car swerves into your lane and forces you off the road but does not touch you (a miss-and-run), it might be harder to trigger UM coverage without an independent witness or corroborating evidence. You must also file a police report within 24 hours.

Can I Claim UIM If I Don’t Have Car Insurance?

If you were driving your own vehicle without insurance at the time of the accident, you are subject to Proposition 213. This law prevents uninsured drivers from collecting non-economic damages (pain and suffering), even if the other driver was 100% at fault. You may still recover your medical bills and lost wages, but the value of the claim will be significantly lower.

What If the At-Fault Driver Is a Government Employee?

If the underinsured driver was operating a city, county, or state vehicle, you have a much shorter deadline. You typically have only six months to file a government tort claim. Missing this six-month window usually bars you from any recovery from the government entity.

Will My Insurance Rates Go Up If I Use My UIM Coverage?

Generally, no. California Proposition 103 prohibits insurance companies from raising your premiums for an accident where you were not at fault. Using the benefits you paid for, specifically UIM coverage, should not result in a rate increase.

Maximizing Recovery Beyond the Minimums

Do not let a stranger’s poor financial planning dictate the quality of your healthcare. The fact that the driver who hit you only carried the bare minimum insurance is unfair, but it is a reality we must deal with strategically.

Insurance companies have a playbook designed to minimize their payouts by leveraging the gap between policies and hoping you miss a procedural step. We ensure every available policy limit is triggered in the correct order so that funding for your recovery is maximized.

If you are dealing with an accident involving an underinsured driver in Redding or Northern California, contact Reiner & Frankel, LLP. We will examine the policies, handle the carrier communications, and ensure you do not inadvertently sign away your right to a full recovery.

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