Insurance Issues When the Offender Is Underinsured

An underinsured motorist claim is not simply a request for the injured person’s insurance company to pay whatever the liability policy does not cover.

The investigation may require review of:

• The at-fault driver’s liability limits;
• Payments to other people injured in the same crash;
• The policy covering the vehicle occupied by the claimant;
• Personal and household automobile policies;
• UM/UIM endorsements;
• Any signed UIM reduction election;
• Liability and contributory-negligence evidence;
• Medical and financial damages; and
• The wording of any proposed release.

A car accident lawyer serving Williamsburg can review these records and explain how the applicable policies may interact. No payment or result is guaranteed.

Underinsured Motorist Claims at a Glance

Issue	General Virginia rule
What does underinsured mean?	The responsible vehicle has liability insurance, but the coverage available for payment is inadequate relative to the damages and applicable UIM protection.
Is Virginia UIM add-on coverage?	Generally, yes, unless a named insured signed a written election allowing a credit for available liability coverage.
Can more than one policy apply?	Potentially. Virginia establishes an order of priority among occupied-vehicle and other policies.
Does UIM prove fault?	No. The claimant must still establish legal liability, causation and damages.
Can the liability limits be accepted first?	Potentially. Virginia provides a settlement procedure that can preserve a UIM claim when properly followed.
Is a hit-and-run a UIM claim?	An unidentified driver is generally treated as uninsured, making the claim a UM matter.

What Does “Underinsured” Mean?

Under Virginia Code § 38.2-2206, a motor vehicle is underinsured when the liability coverage applicable and available for payment is less than the injured person’s damages, up to the UIM protection available to that person.

The analysis therefore requires more than reading the bodily-injury limit on the other driver’s insurance card.

Relevant questions include:

• What is the per-person limit?
• What is the per-accident limit?
• How many people were injured?
• How much has been paid or allocated to other claims?
• Is excess or umbrella coverage available?
• What UIM policies apply?
• Does a signed reduction election affect the calculation?

What Are Virginia’s Minimum Liability Limits?

For Virginia automobile policies effective on or after January 1, 2025, the ordinary minimum liability limits are:

• $50,000 for bodily injury or death to one person;
• $100,000 for bodily injury or death to two or more people in one accident; and
• $25,000 for property damage.

A minimum-limit policy may be insufficient when a crash causes surgery, hospitalization, permanent impairment, substantial wage loss or death.

The policy limit is not an automatic payment. Liability, medical causation and damages must still be established.

What Is Underinsured Motorist Coverage?

UIM coverage may protect a qualifying insured person when the responsible driver has liability insurance but the available amount is inadequate.

Depending on the evidence, covered damages may include:

• Emergency medical treatment;
• Past medical expenses;
• Reasonably anticipated future care;
• Rehabilitation;
• Lost income;
• Reduced earning capacity;
• Physical pain and inconvenience;
• Mental anguish;
• Scarring and disfigurement;
• Permanent impairment;
• Vehicle or personal-property damage; and
• Wrongful-death damages when applicable.

UIM coverage does not guarantee payment of every uncompensated loss.

How Is UIM Different From Uninsured Motorist Coverage?

Uninsured motorist coverage	Underinsured motorist coverage
The responsible vehicle has no qualifying liability insurance.	The vehicle has liability insurance, but the amount available is inadequate.
May apply when an insurer denies coverage.	Usually begins with confirming the available liability limits.
May apply when the driver is unknown.	Usually involves an identified driver and insurer.
An unknown-driver action may proceed against “John Doe.”	An action may proceed against an identified or statutorily released defendant.

An unidentified hit-and-run driver is generally considered uninsured rather than underinsured.

Does UIM Simply Fill the Difference?

Not always. Current Virginia policies can use one of two calculations.

Default add-on UIM

Virginia generally requires UIM coverage to be paid without subtracting the liability coverage available for payment.

Consider this simplified example:

• Supported damages: $200,000
• Available liability coverage: $50,000
• Applicable UIM limit: $100,000

Under the default add-on calculation, potential insurance benefits could include up to $50,000 from the liability insurer and up to $100,000 from the UIM insurer.

The combined $150,000 would not automatically compensate the entire $200,000 loss.

UIM with a reduction election

A named insured may sign a written election allowing the UIM insurer to reduce its payment by the available liability coverage.

Using the same example, the $100,000 UIM limit may receive a $50,000 credit, potentially leaving $50,000 in UIM benefits.

A qualifying election by one named insured generally binds everyone insured under the policy.

What Documents Show Which Calculation Applies?

Request:

• The complete automobile policy;
• Every declarations page;
• UM/UIM endorsements;
• Renewal documents;
• Coverage-change notices;
• Any written reduction election; and
• Correspondence confirming the applicable limits.

An insurance card or premium summary usually does not contain enough information to determine the UIM calculation.

How Do Multiple Injured People Affect the Claim?

A policy written as $50,000/$100,000 generally means:

• No more than $50,000 for one person’s bodily-injury claim; and
• No more than $100,000 collectively for all bodily-injury claims arising from the accident.

When several people are injured, payments to other claimants may reduce the amount available to one injured person.

The investigation should identify:

• Every claimant;
• The nature of each injury;
• The per-person limit;
• The per-accident limit;
• Amounts already paid or reserved; and
• Any excess or umbrella coverage.

Can More Than One UIM Policy Apply?

Potentially. Virginia generally applies UIM policies in this order:

1. The policy covering the vehicle occupied by the injured person;
2. A policy covering another vehicle under which the person is a named insured; and
3. A policy covering another vehicle under which the person is insured in another capacity.

When more than one policy is in the same priority level, responsibility may be divided according to the available coverage under each policy.

Potential policies include:

• The policy covering the accident vehicle;
• The claimant’s personal policy;
• A spouse’s policy;
• A resident relative’s policy;
• An employer or commercial policy; and
• Another policy under which the claimant qualifies as an insured.

Multiple policies do not automatically mean that every limit can be added together. Policy wording, insured status and statutory priority must be reviewed.

Can UIM Protect a Passenger, Pedestrian or Cyclist?

Potentially. Virginia’s definition of an insured may include a named insured and qualifying resident relatives while they are in a motor vehicle or otherwise.

Coverage may therefore require evaluation when the injured person was:

• A passenger in another vehicle;
• Walking;
• Riding a bicycle;
• Riding a motorcycle; or
• Standing outside a vehicle.

Eligibility depends on the policy, household residence, family relationship, vehicle involved and other facts.

Learn more about a pedestrian accident claim in Williamsburg.

Does UIM Coverage Replace the Need to Prove Fault?

No. The injured person generally must remain legally entitled to recover from the underinsured driver.

The claim ordinarily requires proof of:

1. A legal duty;
2. A breach of that duty;
3. Proximate causation; and
4. Recoverable damages.

Potential evidence includes:

• Police information;
• Witness statements;
• Crash-scene photographs;
• Dash-camera and surveillance footage;
• Vehicle damage and event data;
• Traffic-signal evidence;
• Medical records and bills;
• Income documentation; and
• Expert evidence when appropriate.

Does Virginia Contributory Negligence Apply?

Yes. The underinsured driver or UIM insurer may allege that the injured person:

• Was speeding;
• Failed to yield;
• Entered against a traffic signal;
• Changed lanes unsafely;
• Followed too closely;
• Was distracted; or
• Failed to maintain a proper lookout.

An allegation does not decide the claim. The defense requires evidence that the injured person failed to use reasonable care and that the failure proximately contributed to the accident or injury.

Learn more about Virginia contributory negligence.

Why Can the Claimant’s Own Insurer Dispute the Claim?

A UIM carrier may investigate:

• Whether its policy applies;
• Whether the claimant qualifies as an insured;
• Which policy has priority;
• Whether a reduction election applies;
• Who caused the collision;
• Whether contributory negligence exists;
• Whether the accident caused the claimed condition;
• The reasonableness and necessity of treatment;
• Future medical care;
• Income loss; and
• The amount of legally recoverable damages.

The fact that the claimant paid premiums to the insurer does not eliminate legitimate coverage, liability or damage questions.

Should the Claimant Accept the Liability Policy Limits?

A liability-limits offer may be appropriate, but the proposed release should be reviewed before it is signed.

Important questions include:

• Is the offer for all liability coverage available for payment?
• Does another owner or employer policy apply?
• Is umbrella or excess coverage available?
• Which parties are being released?
• Does the release preserve UIM benefits?
• Does it comply with Virginia Code § 38.2-2206(K)?
• Have all UIM carriers been identified?
• Are medical liens or reimbursement claims known?

Virginia provides a statutory procedure that allows an injured person to accept available liability limits, release the liability insurer and its insured, and continue pursuing applicable UIM benefits.

A general release should not be assumed to preserve every other insurance claim.

What Happens After a Policy-Limits Settlement?

When Virginia’s statutory procedure is followed:

• The liability insurer pays its available limit;
• The liability insurer and underinsured driver may receive a full release;
• The UIM claim may continue;
• The UIM insurer may defend liability and damages;
• A pending action may remain in the released driver’s name; and
• A resulting judgment may be enforceable against the UIM insurer within its applicable limits.

The settlement must satisfy the current written-release and notice requirements.

Must the UIM Insurer Receive the Lawsuit?

Yes. When an injured person files an action against an uninsured or underinsured driver and intends to rely on UM/UIM coverage, the applicable insurer generally must be served with the process as though it were a party.

The insurer may then:

• File pleadings;
• Conduct discovery;
• Challenge liability;
• Raise contributory negligence;
• Dispute medical causation;
• Challenge damages; and
• Participate in trial.

Giving the insurer notice of the claim is not necessarily the same as properly serving a filed lawsuit.

Does a Low UIM Offer Establish Bad Faith?

No. A low offer, delay or disputed valuation does not automatically establish bad faith.

Virginia Code § 8.01-66.1 provides a specific remedy when a UM/UIM insurer fails to pay or make a timely and reasonable offer without good faith after its insured becomes legally entitled to recover.

The procedure generally requires:

• A qualifying UM/UIM dispute;
• A written notice of the intended statutory claim;
• A 45-day advance notice period;
• Information sufficient to evaluate liability; and
• Documentation sufficient to evaluate damages.

The court must determine whether the insurer failed to act in good faith. The statutory requirements should not be replaced with a general accusation that the insurer is underpaying the claim.

Should Other Responsible Parties Be Investigated?

Before assuming that UIM is the only remaining source, investigate whether the collision also involved:

• The vehicle owner;
• An employer;
• A commercial motor carrier;
• A rideshare or delivery policy;
• Another negligent driver;
• A defective vehicle component;
• A roadway contractor; or
• Another person or company with an independent legal duty.

Each proposed defendant requires separate evidence of duty, breach and causation.

How Long Does the Claimant Have to File?

Virginia generally requires:

• A personal injury action within two years after accrual;
• A property-damage action within five years after accrual; and
• A wrongful-death action by the personal representative within two years after death.

Different rules may apply when:

• The injured person is a minor or legally incapacitated;
• The driver cannot initially be identified;
• A government entity is involved;
• A previous action was dismissed or nonsuited; or
• Another statute controls.

Insurance negotiations, coverage investigations and settlement discussions do not necessarily extend the filing deadline.

What Should an Injured Person Do?

1. Request the liability limits. Identify both the per-person and per-accident amounts.
2. Identify other injured claimants. Their claims may reduce the liability coverage available for payment.
3. Collect every automobile policy. Include the occupied vehicle, personal, spouse, household and commercial policies.
4. Request the complete UIM documents. Obtain declarations, endorsements and any signed reduction election.
5. Preserve liability evidence. UIM coverage does not replace proof that the other driver caused the crash.
6. Document damages. Keep medical, income, property and future-care records.
7. Investigate other responsible parties. Do not assume one liability policy and UIM are the only sources.
8. Review the proposed release. Confirm that it preserves UIM rights and complies with Virginia law.
9. Provide required notice and service. Claim notice and lawsuit service are separate steps.
10. Track the deadline. Do not allow insurance negotiations to delay required legal action.

Frequently Asked Questions

Does UIM automatically pay everything the at-fault driver’s insurance does not?

No. Payment depends on supported damages, applicable UIM limits, coverage elections, policy priority and other legal and policy requirements.

Does Virginia subtract the liability coverage from UIM?

Current Virginia law generally provides add-on UIM unless a named insured signed a written election allowing the insurer to apply a credit.

Can one named insured change coverage for everyone?

Yes. A qualifying election by one named insured generally binds all people insured under the policy.

Can several UIM policies apply?

Potentially. Virginia establishes an order of priority among the occupied-vehicle policy and other policies covering the injured person.

Can a pedestrian or cyclist use UIM coverage?

Potentially. Named insureds and qualifying resident relatives may have coverage while in a motor vehicle or otherwise, subject to the policy and statutory requirements.

Is a hit-and-run driver underinsured?

An unidentified driver is generally treated as uninsured, making the matter a UM claim.

Can the claimant’s own insurer dispute fault?

Yes. The UIM insurer may dispute liability, contributory negligence, medical causation, damages or coverage.

Should the liability policy limits be accepted?

Possibly, but the release, other insurance and UIM-preservation procedure should be reviewed first.

Does a low offer prove bad faith?

No. Virginia’s bad-faith remedy has specific substantive, documentation and advance-notice requirements.

How long does the claimant have to file?

A Virginia personal injury action generally must be filed within two years, subject to other statutes and circumstances.

Discuss a Williamsburg Underinsured Motorist Claim With Atkinson Law

An underinsured motorist claim may involve several policies, signed coverage elections, liability-limit settlements, contributory negligence and strict filing requirements.

Atkinson Law can review:

• The collision and liability evidence;
• The at-fault driver’s available insurance;
• Each potentially applicable UIM policy;
• Coverage limits, endorsements and elections;
• Medical, income and property losses;
• Other potentially responsible parties;
• Settlement offers and releases;
• UIM insurer disputes; and
• Virginia filing deadlines.

Learn more about working with a Williamsburg car accident lawyer or a personal injury lawyer serving Williamsburg.

Call or text 757-648-8579 or contact Atkinson Law to request a consultation.