Massachusetts Minimum Limits, PIP and the Underinsured Motorist Offset
Dan, a Chelmsford driver, buys only the Massachusetts compulsory auto coverages: bodily injury to others at $20,000/$40,000, damage to someone else's property at $5,000, and $8,000 of PIP. He signed the written rejection of underinsured motorist coverage to save premium. In February he ran a red light and struck Maria's car. Maria's medical bills are $45,000 and she lost $12,000 of wages over ten weeks. Her own Massachusetts auto policy carries $8,000 of PIP and $100,000 of underinsured motorist coverage. After her PIP is exhausted, her attorney demands $150,000 from Dan for medical bills, lost income, pain and suffering, and disability, and threatens to pursue Dan's house if his insurer will not pay the full amount.
1. Which coverages respond, in what order, and what is the most Maria can collect from Dan's compulsory bodily injury coverage?
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Step 1 - Maria's own PIP. Massachusetts PIP is no-fault and follows the injured person's own policy. Her $8,000 pays medical expenses and 75% of lost wages, with both inside the single $8,000 limit. Dan's PIP does not pay Maria; it would cover Dan's own injuries.
Step 2 - the tort threshold. Maria may sue Dan in tort only if her reasonable medical expenses exceed $2,000, or the injury falls within another statutory exception. At $45,000 of medical bills she clears the threshold easily.
Step 3 - Dan's bodily injury to others.** The compulsory limit is $20,000 per person. Her damages exceed that, but the per-person limit is an absolute ceiling for her claim: $20,000 maximum, paid by Dan's carrier on his behalf. The $40,000 per-accident figure matters only if there were additional injured claimants sharing it - and then her $20,000 could be diluted.
Step 4 - property damage. The $5,000 damage to someone else's property coverage responds to the damage to her car, subject to actual cash value and the $5,000 cap. A late-model vehicle will not be made whole at that limit.
So of the $150,000 demand, Dan's compulsory BI coverage supplies $20,000.
2. Calculate Maria's underinsured motorist recovery and her total. Why does she still fall short, and what would change if Dan had carried $100,000 limits?
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Massachusetts UIM is an offset coverage: the limit is reduced by what the underinsured driver's policy actually paid. It is not an add-on stacked on top of the tortfeasor's money.
The math. $100,000 UIM limit - $20,000 received from Dan's BI coverage = $80,000 available from her own carrier, provided she proves damages at or above that level. She does - $150,000 claimed, insured by $45,000 of medical bills.
Total recovery: $20,000 + $80,000 = $100,000 against $150,000 of claimed damages. The $50,000 shortfall exists because the UIM limit is a ceiling on the combined recovery, not a supplement to it. She may still pursue Dan personally for the balance, but collectability depends entirely on his assets - which is why the threat to pursue his house is doing the negotiating work.
The counterintuitive result: if Dan had carried $100,000 limits, Maria's $100,000 UIM limit would be offset to zero ($100,000 - $100,000). Buying UIM at the same limit as the other driver's coverage returns nothing when that driver is the one who hits you. UIM is only worth carrying above the limits you expect to encounter - which is why a $250,000 or $300,000 UIM limit is the meaningful purchase, and why Dan's written UIM rejection means Maria's own carrier is her only backstop.
3. Dan asks what this accident will cost him beyond the claim, and what he should change. Advise him.
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Immediate financial consequences.
- Personal exposure. Dan is legally responsible for Maria's full provable damages, not just his $20,000 limit. After her $80,000 UIM recovery, roughly $50,000 of her claim has no insurance behind it, and his house and wages are reachable. A jury that hears he ran a red light will not be sympathetic.
- SDIP. An at-fault accident involving a claim payment is generally surchargeable under the Massachusetts Safe Driver Insurance Plan, and it stays on his record for several rating years. Ask whether he still qualifies for his safe-driver credit and whether a telematics program is available.
- Defense. His carrier owes him a defense, but that does not reduce his judgment exposure above the limit.
What to change, in priority order:
- Raise bodily injury to at least $100,000/$300,000, and preferably $250,000/$500,000.
- Buy UIM at the same increased limit - the offset logic means it is only useful above the limits of the drivers around him.
- Add a $1,000,000 personal umbrella; for a few hundred dollars it covers the exact gap that just opened.
- Keep the property damage limit above $5,000; the compulsory minimum rarely repairs a modern car.
The honest framing: the compulsory limits are the legal minimum to register a car, not a financial plan.