How Does Underinsured Motorist (UIM) Coverage Work in a South Dakota Car Accident?

When you purchase auto insurance in South Dakota, by law it must include both uninsured motorist (UM) and underinsured motorist (UIM) coverage. Both forms of coverage pay benefits if an insured person is injured or killed in an accident caused by a negligent driver who either lacks insurance (an uninsured motorist) or whose insurance is insufficient to fully compensate the victim for their losses (an uninsured motorist). In either scenario, your own insurance company must assume the negligent driver’s liability for your accident.

South Dakota Supreme Court Overturns Precedent in Landmark UIM Decision

UIM coverage often comes into play because most South Dakota drivers only purchase the minimum amount of liability coverage required by state law. In 2025, those minimums are just $25,000 in bodily injury coverage per person or $50,000 per accident involving multiple victims. The same mandatory minimums apply to UM and UIM coverage. Of course, you are always free to purchase higher amounts of coverage.

Essentially, once you exhaust the limits of a negligent driver’s liability coverage for an accident, you can file a claim with your own UM/UIM carrier for any excess damages. This does not mean your insurance company will pay without putting up a fight. Remember, insurance companies are still for-profit businesses, so it is often in their interest to deny a UIM claim if they think they have a valid reason.

Earlier this year, the South Dakota Supreme Court rejected one such effort to deny UIM coverage. This case, Earll v. Farmers Mutual Insurance Co., involved the tragic death of a 40-year old woman from Carlton, Rebecca Earll, when another driver attempting to flee the police crashed into her SUV. The negligent driver settled with Earll’s estate for the $25,000 liability limit of his policy. Earll also had UIM coverage that paid an additional $75,000 to her estate.

There was a second UIM policy issued by Farmers Mutual to Earll’s parents, who were also the executors of her estate. At the time of Earll’s death, she was living with her parents, and their auto insurance policy included UIM coverage for their two vehicles. The language of the policy defined an “insured” to include a blood relative “who lives with you.” Accordingly, the parents sought additional UIM benefits under their policy for Rebecca’s death.

Farmers Mutual denied the claim, however, citing an exclusion in the policy for any vehicle owned by an insured person but not covered by the policy itself. In this case, Earll was not driving one of her parents’ cars, so Farmers Mutual said the exclusion applied. The South Dakota Supreme Court eventually determined this exclusion violated public policy and was unenforceable as a matter of law.

In reaching this decision, the Supreme Court overturned one of its own prior decisions upholding a similar “owned but not insured” exclusion. The main reason for the reversal was that the Court has found exclusions violate public policy with respect to uninsured motorist (UM) coverage. And given that both UM and UIM coverage serve a similar public policy goal, there was no logical reason to treat them differently in this context. The Supreme Court therefore held Farmers Mutual had to pay the estate’s UIM claim.

Contact a Sioux Falls Uninsured & Underinsured Motorist Accident Lawyer Today

At the end of the day, your insurance company is looking out for its own balance sheet. You need to work with a Sioux Falls uninsured and underinsured motorist accident lawyer who will look out for your interests. Contact Hoy Law today at (605) 334-8900 to schedule a free consultation.

Source:

scholar.google.com/scholar_case?case=1879087812775048886