Indiana Court of Appeals Permits Named Insured Under Commercial Auto Policy to Purchase UIM Limits That Were Less Than Liability Limits

Michael R. Giordano

Lee v. Liberty Mutual Fire Ins. Co., 2019 WL 1475092, (Ind. Ct. App. 2019)

An employee was driving an employer’s automobile when he was involved in an accident with an underinsured motorist (UIM). After receiving $225,000 from the UIM, the employee sought coverage under his employer’s auto policy, which contained $2,000,000 in bodily injury liability limits. However, the employer had rejected, in writing, to provide UIM coverage that equaled the liability limits and instead agreed to purchase UIM coverage with limits of $60,000.

The employee contended that the insurer must provide UIM limits of $2,000,000, which equaled the personal injury liability policy limits to comply with I.C. 27-7-5-2. This statute requires that an insurer offer the named insured UM/UIM limits that equal the general liability limits. I.C. 27-7-5-2(a). However, the statute also permits the named insured to reject, in writing, UM, UIM, or both coverages. I.C. 27-7-5-2(b). In this case, the employee relied upon I.C. 27-7-5-2(c) to contend that an insured may only opt out of coverage by either a complete rejection of both UM and UIM coverages or one or the other coverage. In other words, the insured contended that a named insured cannot do a partial rejection and selection of UIM coverage in limits that are less than the bodily injury limits.

After the employee filed suit against the insurer, both parties moved for summary judgment. The trial court granted the insurer’s summary judgment motion by finding that the rejection and inclusion of partial limits was proper by the named insured employer. The Court of Appeals affirmed and concluded:

… [A]fter an insurer has provided UIM coverage in accordance with the liability limits, the insured may reject the UIM coverage in writing. After the coverage is rejected, the insurer may provide the insured with a UIM coverage plan with limits less than the bodily injury limits specified in the insured’s policy. We determine this result to be compliant with the statutory provisions as the statute itself is silent with respect to the insurer’s obligation after the insured rejects the UIM coverage provided.


The Court also mentioned that if the insured elects to purchase UIM coverage on a primary policy that is less than the liability limits, then the UIM limits cannot be for less than $50,000 in order to comply with Indiana’s Financial Responsibility Statute. I.C. 27-7-5-2(a)(2); 9-24-4-5.

This decision appears to follow Indiana’s public policy of allowing the parties to contractually agree on the extent of coverages that they wish to purchase. So long as the insured has been offered the opportunity to purchase UM/UIM coverages that meet the bodily injury limits, and the insured officially rejects those limits, the insured can also purchase UM/UIM coverage at a lesser amount.