Underinsured/Uninsured Motorists' Consent to Settle
Because a substantial number of owners and operators of motor vehicles in the United States operate their vehicles with inadequate amounts of insurance coverage or with no insurance coverage at all, underinsured motorist coverage, sometimes abbreviated UIM, and uninsured motorist coverage, sometimes abbreviated UM, are included in many motor vehicle insurance policies. Underinsured motorist and uninsured motorist provisions are intended to give persons insured under auto insurance policies and innocent third parties some of the insurance protection they would have received if an underinsured or uninsured driver had been carrying an adequate amount of insurance coverage on his or her vehicle.
Underinsured motorist and uninsured motorist provisions in many auto insurance policies contain clauses that exclude coverage if the insured, without the consent of the insurer, makes a settlement with or obtains a judgment against an uninsured or underinsured motorist who is liable for the damages caused by an accident. These clauses, which are called consent to settle, consent to settlement, or consent to action clauses, are included in the policy because the interests of an insured, who may hope to obtain a quick settlement with an uninsured or underinsured motorist and may be less concerned about the size of the settlement, often differ from the interests of his or her insurer, which hopes to recover from the liable party every possible dollar of the amounts it is required to pay out under its policy.
The business of insurance in the United States, including motor vehicle insurance, has traditionally been regulated by the laws of each state rather than by a single unified system of federal law. As a result, the legal standards governing the validity and effect of consent to settle provisions in auto insurance policies will vary from state to state, and will be found in both the state statutes that regulate the insurance business and the decisions of the courts in insurance-related cases.