Texas Uninsured & Underinsured Motorist Coverage

Inclusion, rejection and eligibility

Insurance Code § 1952.101 requires UM/UIM coverage unless an insured named in the policy rejects it in writing. Statutory provisions also address reinstated and renewal policies and previous rejections involving the same or an affiliated insurer. Obtain the signed rejection and the relevant policy history before treating coverage as absent.

If coverage exists, identify who qualifies as an insured and whether the vehicle and accident satisfy the applicable terms. The injured person’s own policy, a resident-relative policy and the occupied vehicle’s policy may raise different questions. List each potential source separately.

Calculate damages before applying limits

Section 1952.106 addresses amounts the insured is legally entitled to recover from an underinsured owner or operator, subject to the policy limit and reduction for amounts recovered or recoverable from the underinsured vehicle’s insurer. TDI’s commercial form guidance explains that the offset applies against actual damages rather than subtracting liability limits from the UIM limit.

For illustration, $100,000 in covered damages that the insured is legally entitled to recover, less $30,000 recovered or recoverable from the underinsured vehicle’s insurer, leaves $70,000. A $50,000 UIM limit would cap the potential UIM payment at $50,000 before other applicable issues are considered. This is not a promise of payment: fault, coverage, other recoveries and the policy still require analysis.

Disputed liability and the litigation route

You can seek a negotiated resolution with your UIM insurer. If entitlement remains disputed, a demand letter or the filing of a lawsuit does not itself trigger the insurer’s contractual duty to pay. The Texas Supreme Court requires an appropriate signed judgment binding the insurer that establishes the other driver’s liability, damages and underinsured status. You may seek that determination directly against the UIM insurer without first suing the driver.

Allstate v. Irwin approved a declaratory-judgment action under the Texas Uniform Declaratory Judgments Act for that purpose. Under that Act, reasonable and necessary attorney’s fees may be awarded when equitable and just; the award is discretionary.

Building on its 2021 decision, the Court held in In re State Farm (2025) that a party may require severance or separate trials, together with a pause (abatement) of the dependent extra-contractual claims, when the insurer has offered to settle the UIM claim, the insured has not yet obtained the required judgment, and the extra-contractual claims, such as statutory bad-faith claims, seek damages that depend on entitlement to UIM benefits. Discovery into those paused claims must also wait. Relevant discovery about the crash and damages remains subject to ordinary discovery rules and case-specific proportionality limits.

The Court expressly left open when a UIM insurer’s statutory good-faith settlement duties can arise before judgment. Claims for an injury independent of policy benefits also require separate analysis. Keep liability and damages evidence organized separately from complaints about claim handling.

Before resolving the liability claim

Notify every potential UM/UIM carrier and request its position on settlement, releases and any consent or preservation conditions before completing a liability settlement. Preserve the proposed release, liability limits, available coverage evidence, payment allocation and proof of damages.

Even a liability-limits settlement made with the UIM insurer’s consent does not, by itself, establish the other driver’s fault, your damages or entitlement to UIM benefits. Consider the amount recoverable from liability insurance before accepting less than available coverage; the statutory offset is not necessarily limited to the cash settlement received. Keep the underlying injury claim’s limitation period and other applicable deadlines on a separate calendar.