When Is a Vehicle Underinsured in Indiana? The Statutory UIM Test

Related: see the companion guide.

Key takeaways

• The statutory comparison includes coverage available under all bodily-injury liability policies covering persons liable to the insured.
• The total available amount is compared with the insured’s UIM limit at the time of the accident.
• Indiana’s definition excludes a vehicle that is uninsured under Indiana Code § 27-7-5-4^[1](a).
• For qualifying policies, Indiana Code § 27-7-5-2^[2] requires UM and UIM coverage in statutory amounts unless the coverage is rejected in writing; statutory exceptions may apply.

Indiana’s underinsured-vehicle test

Indiana Code § 27-7-5-4(b)^[3] defines an underinsured motor vehicle, subject to the terms and conditions of the coverage, as an insured motor vehicle for which the limits available for payment to the insured under all bodily-injury liability policies covering persons liable to the insured are less than the insured’s UIM limits at the time of the accident. The definition does not include an uninsured motor vehicle under subsection (a).

In words, first identify every bodily-injury liability policy covering a person liable to the insured. Then determine the coverage available for payment to this insured under all of those policies. Compare that available amount with the insured’s UIM limit at the accident time.

The vehicle meets the statutory comparison only when the available amount is lower than the UIM limit. Damages exceeding the available liability amount do not replace that statutory comparison.

Available for payment

Indiana’s statutory text uses the limits available for payment to the insured under all bodily-injury liability policies covering persons liable to that insured. The inquiry therefore accounts for every such policy, while focusing on the amount available to this insured.

An official Indiana Supreme Court opinion in Lakes v. Grange Mutual Casualty Co.^[4] reaffirms Corr and holds that a vehicle was underinsured because the amount actually paid to the insured was less than the per-person limit of the insured’s UIM coverage. Shared liability proceeds can therefore reduce the amount available for payment to an insured.

The statutory vehicle definition is a threshold question and remains subject to the UIM coverage’s terms and conditions.

Documents to gather

Before asking counsel to review the comparison, it can help to collect:

• Policy declarations
• UM/UIM endorsements
• Liability-limit disclosures
• Claimant allocation records
• Insurer correspondence

Comparison scenarios

These word-based scenarios apply Indiana Code § 27-7-5-4^[1](b) without assuming invented dollar figures.

Available amount lower than the UIM limit

After accounting for all bodily-injury liability policies covering persons liable to the insured, the amount available for payment to the insured is lower than the insured’s UIM limit. The insured vehicle meets the statutory comparison unless it is an uninsured motor vehicle under subsection (a), and the definition remains subject to the UIM coverage’s terms and conditions.

Available amount equal to the UIM limit

After accounting for all such liability policies, the amount available to the insured equals the insured’s UIM limit. Because the available amount is not less than the UIM limit, the insured vehicle does not meet the statutory comparison.

Shared liability amount lower for this insured

Several liability claimants share the proceeds, leaving the amount actually available to this insured under all bodily-injury liability policies covering liable persons lower than the insured’s UIM limit. The lower amount available to this insured is used in the statutory comparison.

The UM/UIM boundary

Official text: statutory definitions^[3].

Policy rules

Indiana Code § 27-7-5-2^[5] generally requires qualifying Indiana motor-vehicle liability policies to provide UM and UIM coverage in statutory amounts unless the coverage is rejected in writing. The section contains qualifications and exceptions, and it provides that insurers may not sell or provide UIM coverage in limits below $50,000.

The Indiana Department of Insurance auto-insurance page^[6] states that newly written Indiana auto liability policies include UM and UIM coverage unless rejected in writing and lists $50,000 as the minimum UIM bodily-injury limit. Related: see the companion guide.

Frequently asked questions

Are damages above the other driver’s limit enough to make the vehicle underinsured?

No. Indiana compares the amount available to the insured under all bodily-injury liability policies covering persons liable to the insured with the insured’s UIM limit. Damages alone do not establish the statutory definition.

What if the available liability coverage equals my UIM limit?

Equal amounts do not satisfy the statute’s “less than” comparison.

Can a shared liability amount affect the comparison?

Yes. The Indiana Supreme Court has held that shared liability proceeds can reduce the amount actually available for payment to an insured below the insured’s UIM limit, satisfying the statutory comparison.

Does every Indiana driver have UIM coverage?

No. For qualifying policies, Indiana Code § 27-7-5-2^[2] permits the coverage to be rejected in writing, and statutory exceptions may apply.

Does meeting the definition ensure UIM payment?

No. Indiana Code § 27-7-5-4^[1](b) makes the definition subject to the terms and conditions of the coverage.

If you want help reading a particular policy, you may request a case evaluation.

About: Chad E. Delventhal and our Fort Wayne team.

This article provides general information, not legal advice.

Sources

1. Indiana Code § 27-7-5-4 (iga.in.gov) ↩
2. Indiana Code § 27-7-5-2 (iga.in.gov) ↩
3. Indiana Code § 27-7-5-4(b) (iga.in.gov) ↩
4. official Indiana Supreme Court opinion in Lakes v. Grange Mutual Casualty Co. (public.courts.in.gov) ↩
5. Indiana Code § 27-7-5-2 (iga.in.gov) ↩
6. Indiana Department of Insurance auto-insurance page (secure.in.gov) ↩