Underinsured motorist (UIM) coverage applies where the liability insurance of the person responsible for the car wreck is insufficient to fairly compensate the insured for the injuries and losses sustained. Since as more fully explained in our Kentucky Consumer Guide to Buying Car Insurance, it is prudent to buy as much UIM coverage as you can afford, many individuals and families do so. Depending on the number of vehicles and how the premiums for UIM coverage are calculated and paid, UIM coverage units may be stacked, which means added on top of one another to increase coverage. The circumstances in which UIM coverage can be stacked and, sadly, in which it cannot were addressed by the United States Court of Appeals for the Sixth Circuit in Pennington v. State Farm, No 07-6187 (January 21, 2009), where the court rejected a claim that UIM benefits should be stacked following the death of teenager killed by a drunk driver.

The case illustrates the need to understand how much coverage you are buying with the insurance premium you pay. The Penningtons paid $90.72 for their UIM coverage. This premium was not simply a multiplier of coverage (e.g., multiplying the base premium rate by the number of drivers); rather, it was determined based on a rating factor of 2.7, an actuarial calculation of the added risk associated with adding additional drivers to a single UIM policy. The premium of $90.72 was reached by multiplying the one-driver rate of $33.60 by 2.7 (the risk multiplier that State Farm had determined was appropriate for households with three or more drivers).  This calculation barred the claim the court ruled: "The Penningtons therefore got what they paid for: namely, one unit of UIM coverage for four drivers."

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