Underinsured motorist (UIM) coverage pays the difference between the at-fault driver's policy limits and the insured's actual damages when the tortfeasor's coverage is insufficient to fully compensate the loss. Most UIM policies are written with a consent-to-settle provision: before the insured accepts a settlement from the tortfeasor's carrier, the insured must obtain the UIM carrier's written consent, or the UIM carrier may deny coverage on the ground that it was deprived of its right to pursue subrogation against the tortfeasor. The sequence and form of the consent request is one of the more mechanical but outcome-determinative steps in any UIM case.
The Consent Requirement and What It Protects
The UIM carrier's consent requirement exists because the UIM carrier has a subrogation right against the tortfeasor after paying a UIM claim. If the insured settles with the tortfeasor for policy limits without first obtaining UIM consent, and the tortfeasor receives a release in exchange, the UIM carrier's subrogation right is extinguished. The carrier argues it was prejudiced by the release and uses that prejudice as a basis to deny the UIM claim.
Whether a failure to obtain consent actually extinguishes the UIM claim depends on the state. Some states, including California (under Insurance Code Section 11580.2) and Washington, require the UIM carrier to show actual prejudice before denying coverage based on a failure to obtain consent. Others, including Texas and Florida, more strictly enforce the consent-to-settle provision and allow denial on a no-prejudice basis when the provision is clearly written.
Know the rule in your state before presenting any settlement demand to the tortfeasor's carrier in a case where UIM coverage is in the picture.
When to Identify the UIM Carrier and Open the File
The UIM carrier file should be opened as soon as the client's own policy is identified and it is apparent that the tortfeasor's limits may be insufficient to cover the damages. Do not wait until the tortfeasor's limits are confirmed and a settlement offer is made. Many UIM carriers require notice of the claim within a specified period after the accident, and some policies contain cooperation clauses that require the insured to provide medical records, authorizations, and recorded statements before UIM coverage will be considered. Opening the file early preserves all notice rights and allows you to manage the UIM carrier's information requests on your schedule rather than under the pressure of a pending policy-limits offer from the tortfeasor.
The Consent Letter: Timing and Form
When a policy-limits offer from the tortfeasor's carrier is on the table, send the UIM carrier a formal consent-to-settle letter by certified mail and electronic delivery to the claims handler's documented email address. The letter should: (1) identify the tortfeasor, the tortfeasor's policy limits, and the pending settlement offer; (2) state the insured's damages in summary form, including medical specials and a general damages range, establishing that the tortfeasor's limits are insufficient; (3) request the UIM carrier's written consent to settle for those limits within a specified deadline, typically 30 days; and (4) state that if consent is not received within the deadline, the insured will treat silence as consent or will proceed under whatever the state rule provides for a non-response.
Most states provide that the UIM carrier has a limited period to respond to a consent request. If the UIM carrier does not respond within that period, the insured may settle without consent and the UIM carrier cannot use the failure to obtain consent as a basis to deny the claim. California's framework under Insurance Code Section 11580.2(h) provides a 30-day response period after proper notice before the insured may settle without consent. Document the date of the consent letter, the date of delivery confirmation, and the date the response was (or was not) received.
What the UIM Carrier May Do Instead of Consenting
When the UIM carrier receives a consent-to-settle letter, it has three options: consent to the settlement, deny consent and take over the defense of the claim against the tortfeasor (substituting itself for the tortfeasor and advancing the limits to the insured in place of the tortfeasor's carrier), or deny consent without substituting itself. The third option is generally not available to the UIM carrier in most states: if the carrier refuses to consent, it must either exercise its right of substitution (paying the insured the tortfeasor's policy limits so the tortfeasor can receive a release) or it loses its subrogation right and is deemed to have consented.
If the UIM carrier exercises the substitution right, it pays the at-fault driver's limits to the insured, the tortfeasor receives a release, and the UIM carrier steps into the tortfeasor's shoes with the right to pursue the tortfeasor directly for the amount it paid. This rarely happens in standard auto cases where the tortfeasor is a judgment-proof individual driver, but it does occur in commercial vehicle cases where the tortfeasor or their employer has collectible assets. For additional coverage on UIM policy strategy, see the auto-accidents practice section. Stacking and UIM arbitration procedures are addressed in the case law and settlements section.