Attorney Michael Rehm - (800) 978-0754
California has over two million uninsured drivers on its roads. An estimated half of all auto-liability claims in this state involve a driver who either carries no insurance at all or carries limits too low to cover a serious injury. When you are hurt in an accident caused by one of those drivers, the at-fault party's policy — if one exists — may be worth almost nothing. Your own uninsured or underinsured motorist coverage is often the only meaningful source of recovery available to you.
Attorney Michael Rehm represents insureds at uninsured and underinsured motorist arbitration hearings throughout California.
The Coverage Gap That Created This Problem
California enacted its Uninsured Motorist Law in 1959. At the time, minimum liability limits were set at $15,000 per person and $30,000 per accident — amounts that were intended to cover most injuries of the era. Those limits did not change for nearly fifty years. By 2025, the minimum had finally increased to $30,000 per person and $60,000 per accident for policies issued or renewed on or after January 1, 2025. See Vehicle Code § 16056(a).
The new minimums are already inadequate for serious injury cases. Medical care costs, lost wages, and the long-term effects of a significant injury routinely exceed $30,000. An injured person who collects the at-fault driver's minimum-limit policy may still be left with a fraction of their actual losses. That is precisely what underinsured motorist coverage is designed to address.
The California Supreme Court has been direct about the limits of this law: the Uninsured Motorist Law was not designed to make California drivers whole, or even to ensure they receive what they paid for. It defaults to providing only some coverage to help minimize losses. See Insurance Code § 11580.2. That framing matters when evaluating what a UM or UIM claim can actually recover.
Uninsured Motorist Coverage and Underinsured Motorist Coverage: The Difference
Both coverages are governed by Insurance Code § 11580.2, but they apply in different situations.
Uninsured motorist (UM) coverage applies when the driver who caused your accident carries no bodily injury liability insurance at all, or when the driver's insurer denies coverage or admits coverage only conditionally or with reservation. It also applies in hit-and-run cases involving an unknown driver — with an important limitation discussed below. See Insurance Code § 11580.2(b).
Underinsured motorist (UIM) coverage applies when the at-fault driver carries liability insurance, but with limits that are lower than your own UIM policy limits. UIM does not top up a policy to your actual damages — it fills the gap between what the at-fault driver's policy paid and your own UIM limits.
A concrete example: you sustain injuries reasonably worth a $75,000 recovery. The at-fault driver carries the new state minimum — $30,000. If your UIM limits are $100,000, your UIM carrier owes you up to the difference: $70,000, less applicable offsets. If your UIM limits are only $30,000 — the same as the at-fault driver — UIM coverage does not apply at all. Underinsured motorist coverage is triggered only when the tortfeasor's policy limits are lower than the claimant's UIM limits. See Insurance Code § 11580.2(p)(2).
California is an anti-stacking state. If you have UM or UIM coverage under more than one policy, you cannot add the limits together. Your recovery is capped at the highest applicable limit among the policies that cover the claim. See Insurance Code § 11580.2(d).
Who Is Covered
UM and UIM coverage under Insurance Code § 11580.2 extends to a broader group of people than most policyholders realize.
The named insured and their spouse or registered domestic partner are covered. So are relatives of either who reside in the same household — whether or not they are in the insured vehicle at the time of the accident. The statute uses the phrase "or otherwise," which courts have interpreted broadly to provide coverage to this class of household relatives even when they are pedestrians, cyclists, or occupants of another vehicle. Heirs of the named insured are also covered. Any other person is covered while in, upon, entering, or alighting from the insured vehicle. See Insurance Code § 11580.2(b).
Coverage is mandatory in every California automobile liability policy unless it is specifically waived in writing using the language prescribed by statute. A waiver that does not conform to the statutory form is rebuttably presumed invalid. See Insurance Code § 11580.2(a)(1)–(a)(2).
Hit-and-Run Accidents and Unknown Drivers
When the driver who caused your accident fled the scene and cannot be identified, UM coverage applies — but only if there was physical contact between your vehicle and the unknown driver's vehicle. California courts have interpreted this requirement as a direct application of force. If the unknown vehicle never touched yours, UM coverage for the unknown driver does not apply, even if you can prove that driver caused your accident. See Insurance Code § 11580.2(b)(1).
Physical contact from debris or parts that fall from an unknown vehicle and strike yours does satisfy the contact requirement. See Oanh Thi Pham v. Allstate Ins. Co. (1988) 206 Cal.App.3d 1193, 1196–1198.
In addition to physical contact, a hit-and-run UM claim requires a timely-filed police report and a timely insurance claim. Missing either requirement can defeat coverage. See Insurance Code § 11580.2(b)(2).
The Consent Requirement: A Critical Trap
If you settle your injury claim with an uninsured driver, or obtain a judgment against that driver, without your own insurer's consent, you will lose your UM coverage for the accident entirely. The consent requirement is strictly enforced and requires no showing of prejudice to the insurer. See Insurance Code § 11580.2(c)(3).
The rule is different for underinsured motorist claims. An insured's failure to obtain the carrier's consent to a settlement with an underinsured driver does not result in loss of UIM coverage. The reason is structural: UIM coverage only activates after the at-fault driver's limits are exhausted by settlement or judgment, and an insurer cannot be permitted to prevent that exhaustion simply by withholding consent. See Insurance Code § 11580.2(p)(3).
Do not resolve any claim against the at-fault driver in a UM case without first contacting your own insurer and obtaining written consent.
Workers' Compensation and UM/UIM Claims
If your accident happened while you were working, you may have both a workers' compensation claim and a UM or UIM claim. The two systems do not run independently of each other. Insurance Code § 11580.2(h) provides that any UM or UIM benefit payable to you may be reduced by the amount paid and the present value of all amounts payable to you under any workers' compensation law.
In most cases, if you have or may have rights to workers' compensation benefits, the arbitrator cannot proceed with the UM/UIM arbitration until your physical condition is stationary and ratable. If you are claiming permanent disability, the workers' compensation claim must generally be resolved by award or compromise and release before the arbitration may proceed. See Insurance Code § 11580.2(f).
Every demand for UM/UIM arbitration must contain a declaration under penalty of perjury stating: (i) whether you have a workers' compensation claim; (ii) whether that claim has proceeded to findings and award; and (iii) if not, what good cause exists to proceed with arbitration immediately. A letter to the insurer that does not include this declaration is not a valid demand. See Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783, 792, available at Justia.
How the Arbitration Works
When you and your insurer cannot agree on liability or the amount of your damages, the dispute goes to binding arbitration — not to a jury trial. This is required by law. See Insurance Code § 11580.2(f).
Starting the arbitration. The insured initiates arbitration by sending a written demand to the insurer by certified mail, return receipt requested, addressed to the insurer or its designated agent for service of process. The demand must include the workers' compensation declaration described above. The burden of pursuing arbitration rests with the insured.
Selecting the arbitrator. The form of arbitration is dictated by your policy. Many policies require arbitration before a single neutral arbitrator selected by mutual agreement. Some policies reference the American Arbitration Association (AAA) — if yours does, the process follows the AAA's rules as incorporated by the policy. If the parties cannot agree on an arbitrator, either party may petition the Superior Court for an order appointing one under Code of Civil Procedure §§ 1281.2 and 1281.6. An insured cannot unilaterally select an arbitrator and schedule a hearing absent agreement with the insurer. See Insurance Code § 11580.2(f); American Home Assur. Co. v. Benowitz (1991) 234 Cal.App.3d 192, 201.
Discovery. Standard Code of Civil Procedure discovery applies to UM/UIM arbitrations. See Insurance Code § 11580.2(f). There are important differences from ordinary civil litigation, however. Depositions require a subpoena — not merely a notice. Early depositions are permitted without leave of court as soon as 20 days after the accident. See Insurance Code § 11580.2(f)(3). Wage-loss information and medical authorizations must be provided within 15 days of the insurer's request. See Insurance Code § 11580.2(o).
Discovery disputes go to the Superior Court, not the arbitrator. If a dispute arises over discovery in a UM/UIM arbitration, the arbitrator has no power to resolve it. Jurisdiction over discovery disputes lies exclusively in the Superior Court. See Miranda v. 21st Century Ins. Co. (2004) 117 Cal.App.4th 913, 924–926. Insurance Code § 11580.2(f)(2). A party that needs to compel discovery must file in Superior Court — and must do so quickly enough to get a hearing before the arbitration date.
The award. The arbitrator issues a written award fixing the amount of damages. The award is then subject to the policy limits — unless a CCP § 998 offer comes into play.
CCP § 998 offers. If you serve a valid offer to compromise under Code of Civil Procedure § 998 at least 35 days before the arbitration, and the arbitrator issues an award more favorable than your offer, the insurer owes you expert witness fees and post-offer costs as a statutory penalty — even if those penalties push the total recovery above your policy limits. See Pilimai v. Farmers Ins. Exch. Co. (2006) 39 Cal.4th 133, 139–142.
Statute of limitations. A UM claim is subject to a two-year statute of limitations running from the date of the accident. See Insurance Code § 11580.2. Separately, a petition to compel arbitration must be filed within four years of the date the cause of action accrues — which is the date a party refuses to arbitrate, not the date of the accident. See Code of Civil Procedure § 337(a); Spear v. California State Auto. Ass'n (1992) 2 Cal.4th 1035, 1041–1043.
When Your Insurer Acts in Bad Faith
Implicit in every California insurance policy is a duty of good faith and fair dealing. An insurer that violates that duty is not merely in breach of contract — it is potentially liable in tort. See Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573.
In the UM and UIM context, bad faith can arise in several ways: unreasonable delay in paying a covered claim; failure to properly investigate the claim; unreasonable refusal to consent to a settlement within policy limits that results in an excess judgment. Damages for bad faith can include consequential economic losses, emotional distress, and — where the insurer's conduct involved malice, oppression, or fraud — punitive damages.
Attorney fees that you incur to compel payment of benefits you are owed are themselves compensatory damages in a bad faith case — not merely costs. These are known as Brandt fees, and they factor into the calculation for punitive damages. See Nickerson v. Stonebridge Life Ins. Co. (2016) 63 Cal.4th 363, 372–373.
A bad faith action against your insurer is distinct from the UM/UIM arbitration. Once the insurer pays the policy limits, the arbitration is over. The bad faith claim — including any claim that the insurer should have paid more sooner — is pursued separately in Superior Court, not through the arbitration process. See State Farm Mut. Auto. Ins. Co. v. Sup.Ct. (Balen) (2004) 123 Cal.App.4th 1424, 1431–1432.
Resources
- American Arbitration Association (adr.org) — many UM/UIM policies reference AAA procedures by name; this is the starting point if yours does
- California Department of Insurance — verify insurer licensing, file a complaint against an insurer, and look up your policy information
- Insurance Code § 11580.2 — the full text of California's Uninsured Motorist Law
Talk to an Attorney
Attorney Michael Rehm provides representation at uninsured and underinsured motorist arbitration cases throughout California on a contingency fee basis. No fee without a recovery. Call (800) 978-0754.