The Underinsured Motorist 'Setoff': The Math That Surprises Injured Ohioans

Published January 7, 2016 · Injury Law Basics

Every January I meet with people who were hurt in a holiday-season crash and have just learned something about their own auto policy that nobody explained when they bought it. They were careful. They paid for $100,000 in underinsured motorist coverage. The driver who hit them carried a $50,000 policy. And now their own insurance company is telling them the most it will ever pay is $50,000, not $100,000.

That is not a mistake by the adjuster. It is how underinsured motorist coverage works in Ohio, and the arithmetic catches almost everyone off guard. This post walks through it so you can look at your own declarations page with clear eyes, before you need it.

Two coverages that sound alike but work differently

Uninsured motorist coverage (UM) pays when the at-fault driver has no liability insurance at all, or cannot be identified. Underinsured motorist coverage (UIM) pays when the at-fault driver has some insurance, but not enough to cover your injuries. I covered the basics of both in an earlier post on UM/UIM coverage, and our UM/UIM practice page goes into how claims are made.

The statute that governs both is R.C. 3937.18. Two features of it matter here. First, under division (A), Ohio insurers may offer UM/UIM coverage but are not required to include it in your policy. If you did not ask for it, you may not have it. Second, division (C) defines what "underinsured" means and how the coverage pays, and that is where the surprise lives.

The statute: UIM is "difference" coverage, not "add-on" coverage

Division (C) says underinsured motorist coverage applies when the limits of the at-fault driver's liability coverage are less than your UIM limits. It then says, in plain words, that the policy limits of the underinsured motorist coverage shall be reduced by the amounts available for payment under the at-fault driver's liability policies.

Read that twice. Your UIM limit is not a separate pot of money that sits on top of the other driver's policy. It is a ceiling on the total that can be paid to you from both sources. Lawyers call this a "setoff," and Ohio's version is one of the least generous in the country. Some states have "add-on" or "excess" UIM coverage, where your limit stacks on top of the at-fault driver's payment. The statute expressly says Ohio does not: UIM "is not and shall not be excess coverage."

Worked examples

Assume in each example that your injuries are serious and worth far more than any of these numbers, so the only question is how much insurance exists to pay you.

Example 1: $100,000 UIM, $50,000 at-fault driver. The at-fault driver's insurer pays its $50,000 limit. Your own UIM coverage then pays the difference between your $100,000 limit and the $50,000 already available: $50,000. Total recovery: $100,000. Your "$100,000 of UIM coverage" produced $50,000.

Example 2: $25,000 UIM, $25,000 at-fault driver. This is the trap for people who carry only Ohio's minimum limits. The at-fault driver's limit is not less than your UIM limit; it is equal to it. Under division (C), that driver is not "underinsured" at all, and your UIM coverage pays nothing. Total recovery: $25,000, even if you have $200,000 in hospital bills. As I wrote when the state minimums went up in December 2013, the new 25/50/25 floor is still not enough to protect anyone.

Example 3: $250,000 UIM, $25,000 at-fault driver. The at-fault insurer pays $25,000. Your UIM coverage can pay up to $225,000 more. Total potential recovery: $250,000. Now your coverage is doing real work. The premium difference between $100,000 and $250,000 of UIM coverage is usually modest; the difference in a serious-injury case is life-changing.

Example 4: several people hurt, one small policy. Suppose the at-fault driver carries $25,000 per person and $50,000 per accident, and three people in your car are badly hurt. The $50,000 per-accident limit has to be shared, so each of you may receive far less than $25,000 from that driver. The statute speaks of the amounts "available for payment" to you, so the setoff against your UIM coverage should reflect what was actually available to you, not the driver's nominal per-person limit. That distinction can be worth tens of thousands of dollars and is exactly the kind of issue your own insurer will not volunteer.

Why the setoff makes early legal advice more important, not less

Because UIM is difference coverage, the two claims, against the at-fault driver and against your own insurer, are linked. Several things have to be handled in the right order:

• Your insurer's consent to settle. Most UIM policies require you to give your insurer notice and an opportunity to substitute its own payment before you accept the at-fault driver's limits, because your insurer has a subrogation right under R.C. 3937.18(J). Settle with the other driver without that notice and you can lose the UIM claim entirely.
• The policy's own deadline. Division (H) lets insurers require that UIM claims be brought within three years of the crash. That is shorter than many people assume and runs even while you are negotiating with the at-fault driver. I explained the problem in this post on the three-year UM/UIM trap.
• Proving the full value of the case. Your own insurer stands in the shoes of the at-fault driver under division (D), meaning you must prove fault and damages against your own company just as you would against a stranger. Expect the same skepticism about medical bills and the same arguments about pre-existing conditions.

A real example of how these pieces fit together is in my case study of an Ohio UIM claim against a $25,000 driver.

Check your declarations page this month

Pull out the one- or two-page declarations sheet from your auto policy and look for three things: whether UM/UIM coverage is listed at all; the per-person and per-accident limits; and whether those limits match your liability limits. If your UIM limit is $25,000 or $50,000, you are protected only against drivers who carry less than that, which in Ohio means drivers with no insurance at all. Raising it to $250,000 or more is the single most effective step most families can take to protect themselves from someone else's bad decisions.

What this means for you

If you have already been hurt, the setoff math decides what your case is actually worth in dollars, as opposed to what a jury might say it is worth. The at-fault driver's limits, your own UIM limits, any other household policies, and the order in which claims are presented all matter. Our Dayton car accident practice starts every serious-injury case by identifying every policy that could respond, and we handle the notice and consent steps so nothing is forfeited.