UM vs. UIM: Coverage Trigger Quick Reference
| Coverage Type | When It Applies | Statutory Trigger |
|---|---|---|
| Uninsured Motorist (UM) | Tortfeasor has no liability insurance; tortfeasor’s insurer is insolvent within 1 year of the accident; tortfeasor is unidentified (hit-and-run) | 36 O.S. § 3636(C)(1): vehicle whose liability insurer is insolvent; unidentified vehicle per § 3636(C) |
| Underinsured Motorist (UIM) | Tortfeasor has liability insurance, but the liability limits are less than the amount of your client’s claim | 36 O.S. § 3636(C)(2): “insured motor vehicle, the liability limits of which are less than the amount of the claim of the person or persons making such claim, regardless of the amount of coverage of either of the parties in relation to each other” |
The UIM trigger is claim-to-limits, not coverage-to-coverage. The statute compares the tortfeasor’s liability limits to the amount of the claim, not to the amount of the insured’s own UM/UIM coverage. A substantial liability policy does not preclude UIM coverage if the claim value exceeds it. Uptegraft v. Home Ins. Co., 662 P.2d 681 (Okla. 1983); Keel v. MFA Ins. Co., 553 P.2d 153 (Okla. 1976).
36 O.S. § 3636: Subsection-by-Subsection Reference
| Subsection | Subject | Key Rule |
|---|---|---|
| § 3636(A) | Mandatory Coverage | No auto liability policy may be issued in Oklahoma unless it includes UM coverage for vehicles registered or principally garaged in-state; every auto policy must offer UM coverage |
| § 3636(B) | Limits, Stacking, Arbitration | Coverage must meet statutory minimums (47 O.S. § 7-204); higher limits must be offered; stacking prohibited for policies issued after November 1, 2014, unless expressly provided; insured may demand arbitration; insured may sue tortfeasor if no arbitration agreement within 3 months |
| § 3636(C) | UM/UIM Triggers | Defines “uninsured motor vehicle” to include: (1) vehicle whose liability insurer is insolvent; (2) vehicle whose liability limits are less than the amount of the claim |
| § 3636(D) | Insolvency Coverage Window | Insolvency protection under subsection (C)(1) applies only if the tortfeasor’s liability insurer becomes insolvent within 1 year after the accident |
| § 3636(E) | Exclusion for Uninsured Owned Vehicles | No UM coverage while the insured occupies an uninsured vehicle owned by, furnished to, or available for the regular use of the named insured, resident spouse, or resident relative |
| § 3636(F) | Subrogation and Substitution | UM insurer is subrogated to the insured’s recovery rights; when a tentative tort settlement for liability limits has been reached, insurer has 60 days from proper written notice to substitute its payment; failure to pay within 60 days forfeits all subrogation rights |
| § 3636(G) | Rejection of UM Coverage | Named insured may reject UM in writing; rejection is valid for the life of the policy and is not re-triggered by renewal, reinstatement, or amendment unless the named insured requests reinstatement |
| § 3636(H) | Mandatory Offer Form (eff. April 1, 2005) | Prescribes required offer language; insurer must present four options: same limits as bodily injury coverage, minimum limits ($25,000 per person), an amount in between, or rejection of UM coverage |
The Substitution Doctrine: 36 O.S. § 3636(F)
The § 3636(F) substitution mechanism is where most UM/UIM practitioners encounter problems they did not anticipate. The statute gives the UM carrier a choice once the tortfeasor offers liability limits: waive subrogation and allow the settlement to proceed, or substitute its payment in place of the tortfeasor’s settlement amount and assume the insured’s recovery rights. If the carrier fails to act within 60 days of proper written notice, it forfeits all subrogation rights on amounts paid under the UM policy.
The 60-Day Notice Procedure
| Step | Action | Requirement |
|---|---|---|
| 1 | Tortfeasor offers policy limits | Substitution does not come into play until there is a full policy limits offer; do not send the § 3636(F) notice prematurely |
| 2 | Send a written notice to the UM carrier by certified mail | Notice must include: (a) written documentation of pecuniary losses, including copies of all medical bills; (b) written authorization or a court order to obtain reports from all employers and medical providers |
| 3 | UM carrier has 60 days to respond | Within 60 days, the carrier may substitute its payment to the insured for the tentative settlement amount; if it does, it receives the insured’s right of recovery against the tortfeasor to the extent of the substituted payment |
| 4 | Carrier misses the 60-day window | The carrier “has no right to the proceeds of any settlement or judgment, as provided herein, for any amount paid under the uninsured motorist coverage.” This is a complete forfeiture of subrogation rights |
Once the limits offer is on the table, send the § 3636(F) notice immediately. The 60-day clock is a hard deadline for the carrier. If notice is defective (missing medical bills or authorizations), the clock may not start. Send a complete, certified-mail notice and calendar both the 60-day deadline and a follow-up at day 45.
Pre-Payment of Benefits Does Not Buy Subrogation
Section 3636(F) establishes the exclusive mechanism for a UM carrier to acquire subrogation rights: substitution of payment within 60 days of proper written notice after a policy-limits offer. A carrier that pays UM benefits before the tortfeasor offers policy limits has not “purchased” subrogation rights outside this statutory process. The substitution procedure applies regardless of when the carrier paid UM benefits. Nothing in the statute creates an alternative path to subrogation through early payment, and the carrier cannot bypass the 60-day mechanism by arguing that pre-payment makes it inapplicable.
When a UM carrier argues that pre-payment of benefits exempts it from the 60-day substitution procedure, the answer is the plain text of § 3636(F). The statute conditions subrogation on the substitution procedure, not on the timing of benefit payments.
Burch v. Allstate: No Need to Wait for the Tortfeasor’s Offer
Under Burch v. Allstate Insurance Company, 1998 OK 129, 977 P.2d 1057, the UM carrier is directly and primarily liable to the insured for the entire loss up to policy limits. Once the value of your client’s claim exceeds the tortfeasor’s policy limits, the UIM carrier must pay the claim value up to the UIM coverage limits, without waiting for the tortfeasor to make a policy limits offer. You do not have to exhaust the tort case before pursuing UIM benefits when the damages clearly exceed available liability coverage.
Raymond v. Taylor: UM Subrogation Limited to Primary Insurer
In Raymond v. Taylor, 412 P.3d 1141 (Okla. 2017), the Oklahoma Supreme Court held that under § 3636(F), a UM carrier’s subrogation rights are limited to proceeds from the tortfeasor’s primary liability insurer. The carrier is not entitled to subrogation from the tortfeasor’s excess liability policy. This prevents the insurer from clawing back UM payments from your client’s recovery against excess coverage and limits the exposure of high-limit cases to insurer subrogation claims.
Stacking Rules
For policies issued or renewed after November 1, 2014, § 3636(B) prohibits stacking of UM/UIM limits across multiple vehicles on the same policy or across multiple policies, unless the policy expressly provides for aggregation. The available UM/UIM recovery is capped at the single highest applicable limit.
For policies issued before November 1, 2014, pre-amendment stacking arguments remain viable. Confirm the policy’s original issuance date, not just the current policy period, before advising on available coverage. Renewal of a pre-2014 policy may not reset the issuance date for stacking purposes.
UM Rejection Form Defects
A defective UM rejection form may restore full UM coverage even when the insured signed the form. The § 3636(G) and § 3636(H) requirements are technical. Scrutinize the rejection form on every case where UM coverage has purportedly been waived:
| Issue to Check | Legal Consequence if Defective |
|---|---|
| Did the form use the mandatory § 3636(H) offer language in effect at the time of issuance? | Non-compliant form may render rejection invalid; § 3636(H) mandatory offer form required for policies issued after April 1, 2005 |
| Did the form present all four required options (same-as-BI limits, minimum limits, intermediate amount, and rejection)? | Failure to present all options may void the rejection |
| Was the rejection signed by the named insured specifically? | Signature by an authorized agent or spouse may not satisfy § 3636(G) for the named insured’s coverage |
| For policies issued before April 1, 2005: Does the form meet the then-current statutory requirements? | Pre-§ 3636(H) rejections are governed by the pre-amendment form requirements; verify against the version of § 3636 in effect at the time of issuance |
The statutory requirements are precise, and rejection forms must comply “to the T.” Insurers that present technically defective rejection forms have acknowledged coverage owed when confronted with the deficiency. Review the actual form, not just the policy declarations page.
Hospital Liens and UM Proceeds: The Kratz Rule
Hospital liens filed under 42 O.S. § 43 attach only to a plaintiff’s recovery from the tortfeasor’s liability coverage. They do not attach to UM/UIM proceeds. This is the holding of Kratz v. Kratz, 1995 OK 63, 905 P.2d 753, in which the Oklahoma Supreme Court unequivocally ruled that hospital liens filed pursuant to 42 O.S. § 43 do not attach to uninsured motorist proceeds. The Court explicitly overruled prior contrary authority.
When your client has both a tort recovery and a UM/UIM recovery, the hospital lien attaches only to the tortfeasor’s liability proceeds. Structure settlements accordingly, and if the hospital or its collection counsel argues otherwise, cite Kratz directly. The argument that lien law is ambiguous on this point was closed by the Oklahoma Supreme Court in 1995.
Additionally, 31 O.S. § 1(A)(21) exempts UM proceeds from execution in bankruptcy. If your client is in or near bankruptcy, the UM recovery is protected from creditors in that proceeding.
WC Subrogation and UM/UIM: The Interaction
The workers’ compensation carrier’s subrogation right is derivative of the tort claim. It attaches to proceeds from the tortfeasor’s liability coverage, not to your client’s own UM/UIM coverage. Your client paid the premiums for that coverage; the WC carrier has no claim on it. This position is well-supported under Oklahoma law and is the correct response to any WC carrier argument to the contrary.
The critical issue is sequencing. Resolving the district court tort case before the WC joint petition creates a serious risk: the comp carrier may claim a credit for the entire net recovery against future benefits obligations. That credit can eliminate future PPD, medical, and other WC entitlements.
| Scenario | Risk | Recommended Approach |
|---|---|---|
| Resolve the district court (tort and UM) before the WC joint petition | WC carrier may claim credit for the entire net recovery against future benefits, potentially eliminating future PPD and medical entitlement | Avoid unless WC carrier agrees in writing to waive subrogation, reimbursement rights, and future offset claims; get the WC subrogation figure liquidated before any district court distribution |
| Resolve the WC joint petition first | Lower risk if the settlement language is drafted correctly | Settlement language must waive both subrogation rights AND the right to reimbursement of all third-party recovery; “waiving subrogation” alone is not enough |
| Concurrent resolution | Requires active coordination between WC counsel and district court counsel; all parties must agree to amounts and no future offsets | Have WC carrier’s counsel present at settlement conference; get agreement in writing before distributing any funds |
On settlement language: under Frank’s Tong Service v. Lara, 2013 OK CIV APP 22, the settlement document must include a waiver of both the subrogation right and the right to reimbursement of all funds obtained from a third party. A waiver that covers only subrogation leaves the reimbursement right intact. Draft both waivers expressly.
Note also that 36 O.S. § 6092 prohibits subrogation of UM medical expense payments specifically. The Oklahoma Supreme Court confirmed that § 6092, read together with § 3636, prohibits an insurer from subrogating its rights to recover UM payments made for medical expenses against the insured. This is a separate statutory prohibition reinforcing the protection of your client’s UM recovery from subrogation claims.
Bad Faith in the UM/UIM Context
UM/UIM claims are first-party claims. The insurer owes your client a duty of good faith in adjusting the claim, including conducting a reasonable investigation and paying the claim without placing the insurer’s own interests above the insured’s. Bad faith remedies in the UM context can include punitive damages.
Common bad faith issues to watch for in UM/UIM cases:
| Issue | Bad Faith Theory |
|---|---|
| Use of defense-retained IME doctors to evaluate first-party UM claims | Deploying a physician whose standard role is adverse to plaintiffs to evaluate your client’s own first-party claim raises bad faith questions about the reasonableness and independence of the adjustment; this is the same doctor the carrier uses to deny third-party claims, now being used against its own insured |
| Unreasonable delay in investigating or paying UM benefits | Standard first-party bad faith under Oklahoma law: insurer may not subordinate the interests of its insured to its own financial interests |
| Inadequate investigation before denying or reducing the claim | Obligation to conduct a full, reasonable investigation before reducing or denying benefits; failure to investigate constitutes independent grounds for bad faith |
When you have a bad-faith UM/UIM case, and the carrier used a retained defense expert in the adjustment, pursue financial discovery against that expert. Courts have ordered defense examiners to produce billing records and financial records showing the full extent of their relationship with the carrier. In at least one Oklahoma case, the examiner refused to produce the financial information ordered, and opposing counsel withdrew the expert rather than compel production. Subpoenaing those records forces the insurer to either expose the financial relationship or abandon the expert. Raise this in your bad faith discovery from the outset.
The UIM “Gap” Problem: Settling for Less Than Liability Limits
The UIM trigger under § 3636(C)(2) is based on the “amount of the claim” compared to the tortfeasor’s liability limits, not the settlement amount. But what happens when your client settles the tort case for less than the available liability limits? Oklahoma law does not clearly answer this question.
The statutory language reads: “the liability limits of which are less than the amount of the claim.” That language supports the argument that the UIM trigger is claim value, not settlement proceeds. But § 3636 does not expressly address the settlement-below-limits scenario, and the tension between the claim-value trigger and the settlement-proceeds result creates genuine litigation risk.
Practical guidance:
- Before settling the tort case for less than available liability limits, analyze the impact on the UIM claim and document that analysis in the file
- If the claim value clearly exceeds the liability limits, the UIM carrier’s obligation under Burch arises from the claim value, not the settlement amount; build that record before settling
- The Phillips v. New Hampshire Insurance Co., 263 F.3d 1215 (10th Cir. 2001) analysis of § 3636 as a “speedy payment mechanism” whose central goal is ensuring payment of damages to insureds supports a claim-value interpretation of the trigger
- Porter v. MFA Mutual Ins. Co., 643 P.2d 302 (Okla. 1982) addressed the gap analysis in an earlier statutory context; Brooks v. Philadelphia Indemnity Insurance Company, 2022 WL 402386 (10th Cir. 2022) provides a more recent federal analysis
