Navigating risks in the transportation industry can be challenging, and one major roadblock can be uninsured or underinsured motorists. In 2023, the Insurance Research Council (IRC) reported that more than one in seven U.S. drivers were uninsured. When underinsured motorists are included, the IRC found that 33.4 percent of drivers were either uninsured or underinsured in 2023, meaning that roughly one in three drivers lacked adequate insurance to cover serious crash losses.
As another example, at the state level, Ohio’s uninsured motorist rate was estimated at approximately 18.5 percent, which exceeds the national average and indicates that nearly one in five drivers on Ohio roadways were operating without required insurance.
The rise in uninsured drivers contributes to higher insurance costs, which are ultimately passed on to insured drivers through increased premiums. For this reason, it is important to understand and manage uninsured motorist (UM) and underinsured motorist (UIM) coverage to help protect both drivers and businesses from unexpected expenses.
What is UM and UIM coverage in trucking?
UM/UIM coverage is designed to protect drivers who are injured by motorists with no insurance (uninsured) or whose insurance limits are too low to cover the damage (underinsured). It can cover medical bills and lost wages; vehicle damage is typically addressed through collision or uninsured motorist physical damage (UMPD) coverage, where available.
However, in commercial trucking, this coverage often overlaps with other existing protections and may do more harm than good. There are a few factors for trucking companies to consider:
- Workers’ Compensation Coverage: Many commercial drivers are already protected by workers’ comp or occupational accident insurance if they’re injured on the job, making UM/UIM coverage redundant in many cases.
- Physical Damage and Cargo Coverage: Damage to tractors, trailers or cargo is typically covered by physical damage or cargo policies, not UM/UIM.
- Impact on Auto Liability (AL) Loss History: Claims filed under UM/UIM could negatively affect your commercial auto liability policy’s loss history, potentially leading to higher premiums or less favorable renewal terms.
Due to these potential overlaps, some motor carriers may consider waiving or reducing their UM/UIM coverage to help manage their insurance costs. While your insurance advisor will be able to provide specific guidance, a few relevant regulations and potential risks to be aware of include:
- State Rules: Some states require UM/UIM coverage, so motor carriers must ensure compliance to avoid issues or penalties.
- Accidents Outside Work: In certain situations, drivers may be able to claim against the motor carrier’s UM/UIM policy for accidents that happen outside of work, such as while on vacation.
- Stacking Limits: In states that allow stacking (combining coverage limits for multiple vehicles), UM/UIM coverage can be stacked across multiple policies, which could end up costing more if a claim happens.
While understanding the scope and limitations of UM/UIM coverage is essential, it’s equally important to examine how this coverage influences employer liability, claims and insurance costs in real-world scenarios.
Impact of UM/UIM Claims on Employers
While workers’ compensation covers many workplace injuries, employees may also have claims in other circumstances, such as a negligent third party, faulty machinery or exposure to hazardous materials. Employees exposed to hazardous materials in the transportation industry may face particularly serious risks.
It is important to understand how UM/UIM coverage can factor in these situations, especially in a non-exclusive remedy state. In these states, employees may be allowed to pursue both workers’ compensation claims and civil action against a negligent third party. These overlapping claims can affect how coverage is applied and even how future premiums are calculated.
The following scenario demonstrates how these principles might apply to trucking companies:
Tom, a truck driver for ABC Trucking, is injured while making a delivery at a facility owned by DEF Corp when a DEF employee operating a company vehicle negligently strikes him. While DEF is at fault, the state allows Tom to also pursue a claim against ABC Trucking’s UM/UIM coverage because it does not limit claims to workers’ compensation alone.
In the aftermath of the accident, Tom receives workers’ compensation benefits for his medical bills and lost wages. And, because the state allows it, Tom also files a UM/UIM claim with ABC Trucking’s commercial auto policy in order to get paid for things workers’ compensation does not cover, such as pain and suffering.
Here are a few ways that ABC Trucking could be impacted by a UM/UIM claim following an accident like the one involving Tom:
- Higher Premiums: If ABC Trucking keeps UM/UIM coverage or has limits above the state minimum, insurance costs may increase because of a potential large payout risk.
- Effect on Auto Liability Coverage: UM/UIM claims can make ABC Trucking’s accident history look worse, potentially raising auto insurance costs or limiting coverage options.
- Impact on General Liability Insurance: In some cases, claims can spill into commercial general liability (CGL) coverage; for example, if Tom alleges that the company didn’t check the delivery site’s safety, this could allow for a CGL claim. High UM/UIM limits could encourage these crossover claims, which could also affect CGL policy premiums.
Waiving Your Company’s UM/UIM Coverage
Waiving UM/UIM coverage could help to lower potential high-cost claims, keep insurance premiums manageable, reduce exposure to additional non-economic damage claims beyond workers’ compensation and simplify the claims process by keeping coverage clear and focused. However, waiving UM/UIM coverage may not be an option for all motor carriers.
Some states do not permit a full waiver of UM/UIM coverage. In those jurisdictions, if limits are not affirmatively selected or reduced, UM/UIM coverage often defaults to the motor carrier’s auto liability bodily injury limits.
To help manage exposure and premium impact while remaining compliant, carriers may be able to select UM/UIM limits that are equal to the state’s minimum bodily injury liability limits rather than matching higher auto liability limits. Coverage options and limit elections should always be reviewed with your business insurance broker to ensure compliance with applicable state laws.
Although coverage choices can have a significant impact on costs and risks, recent legal developments further complicate the overlap between UM/UIM and workers’ compensation claims.
How Legal Trends Affect UM/UIM Claims
In recent years, workers’ compensation and plaintiff attorneys have requested UM/UIM policy limits and details in their claims and letters with the goal of identifying every possible source of recovery. Because of this, handling claims can become more complex when both a worker’s own coverage and a third party’s insurance are involved.
A key case illustrating this is Klabon v. Travelers Insurance in 2024. Kevin Klabon was injured when driving a company vehicle that was struck by another driver who failed to stop at a red light. He received workers’ compensation benefits from his employer and a settlement from the at-fault driver’s auto insurance provider. He also sought UIM benefits under his employer’s commercial auto insurance policy, but these benefits were not paid out in full.
The Colorado Supreme Court held that Klabon’s request for UIM benefits was not barred by Colorado’s workers’ compensation exclusivity clause. The ruling clarified that when a third party (i.e., not the employer or employee) causes the injury, the employee can still pursue a claim under the employer’s UM/UIM coverage, even if the employee already received workers’ compensation benefits.
For motor carriers, this decision signals increased potential exposure. Employers may face claims that seek recovery from both workers’ compensation and UM/UIM coverage, which increases the complexity of evaluating claims and potential payout. This case also highlights the importance of having well-structured policies and effective claim management strategies in place.
How Employers Can Manage UM/UIM Claims
Proactive management of UM/UIM coverage can help reduce exposure to liability, control insurance costs and protect employees in the event of accidents involving uninsured or underinsured drivers. A structured approach can also help motor carriers maximize the benefits of UM/UIM coverage. Carriers may want to discuss the following with their insurance advisor:
- Clarify who’s covered. Limit who can claim UM/UIM benefits by clearly stating the covered individuals in your policies.
- Specify coverage triggers. Spell out the situations where UM/UIM applies.
- Prevent multiple claims. Insert anti-stacking clauses where necessary and appropriate.
- Review policy language: Ensure wording is clear to reduce the risk of improper access to UM/UIM funds.
Plan for the Road Ahead
In today’s transportation landscape, where uninsured and underinsured drivers remain a persistent challenge, careful management of UM/UIM coverage is essential. By clarifying who is covered, limiting potential stacking and designing policies that reflect both operational and personal use, motor carriers can find the right balance between risk protection and cost efficiency.
Higginbotham’s insurance brokers specialize in helping trucking companies to reduce their risk exposure, control insurance costs and build comprehensive insurance programs that protect your fleet, drivers and bottom line. To learn more about how Higginbotham can provide a single source solution for your company’s coverage, connect with a member of our team today.
