After a car crash, or other motor vehicle accident, many people assume that the at-fault driver’s insurance will fully cover their losses. Unfortunately, that is often not the case, but there is a way to find out. When the at-fault driver carries only minimal insurance, injured people frequently discover that their damages exceed the available liability coverage. That is where underinsured motorist (UIM) coverage comes into play. 

Liability Insurance vs. UIM Coverage

When someone causes a crash, their bodily injury liability insurance is responsible for paying damages they legally owe to injured people. This is considered a third-party claim, meaning the insurer owes no duty of good faith to the injured claimant.

UIM coverage is different. A request for UIM benefits is a first-party claim, meaning it arises under your own insurance policy. Because of this relationship, the insurance company owes its insured a duty of good faith and fair dealing, which includes duties to:

• Communicate honestly
• Conduct a thorough investigation
• Consider all available information
• Fairly evaluate the claim
• Make reasonably prompt payments once benefits are owed

Colorado law recognizes these obligations under the state’s insurance statutes.

When Do You Have a UIM Claim?

A UIM claim exists when two things are true:

1. Your damages exceed the available liability limits of the at-fault driver, and
2. You have applicable UIM coverage.

In other words, UIM coverage helps fill the gap between the at-fault driver’s insurance and the full amount of your damages.

Colorado’s UIM statute explains that this coverage is intended to pay the damages an insured person is legally entitled to recover from an underinsured driver, up to the policy limit.

A Few Things to Keep in Mind

1. You Do Not Have to Exhaust the Liability Policy Before Recovering UIM Benefits

One common misconception is that you must collect the full liability limits from the at-fault driver before pursuing UIM benefits. Colorado law does not require that. What matters is the difference between your damages and the liability limits, not the amount actually recovered from the at-fault driver’s insurer.

2. UIM Coverage Follows the Person, Not the Vehicle

Another important feature of UIM coverage is that it typically follows the insured person rather than the vehicle. This means coverage may apply when the insured is:

• Driving a different vehicle
• Riding as a passenger
• Riding a bicycle
• Walking as a pedestrian

Because UIM coverage follows the person, it may also be available through multiple policies, including:

• The injured person’s auto policy
• Policies issued to resident relatives
• Umbrella policies
• Employer policies if the injury occurred while working

Investigating all possible policies is an important step in maximizing recovery.

Why UIM Claims Can Be Complicated

Although UIM claims arise under your own insurance policy, courts recognize that the relationship can become quasi-adversarial. The insurer must evaluate the claim in good faith but also has a financial interest in minimizing liability or disputing damages, rather than necessarily paying out the maximum amount. Because of this dynamic, UIM claims often require careful documentation and legal guidance.

When Hailey | Hart gets involved

We deal with UIM claims each time we represent someone in a personal injury case who has been hurt in a motor vehicle crash when they: 

1. have injuries, damages and losses exceeding the limit of the at-fault driver’s insurance; and
2. have their own auto policy with UIM coverage.

If the UIM carrier handles the UIM claim in a way that is contrary to the obligated standard of care, they can also become an insurance bad faith claim. 

The Bottom Line

Underinsured motorist coverage is designed to protect you when the at-fault driver in an accident does not carry enough insurance to fully compensate you for your injuries. Understanding how these claims work—and identifying all available coverage—can make a significant difference in the outcome of a serious personal injury case.