How Workers' Compensation Interacts with Underinsured Motorist Coverage

Basic Interaction

When an employee is injured in a motor vehicle accident that occurs while performing job duties, workers' compensation provides medical expenses and a portion of lost wages regardless of fault. If the at‑fault driver lacks sufficient liability insurance, the employee's underinsured motorist (UIM) coverage can step in to cover the shortfall.

Claim Sequence

First, the employee files a workers' compensation claim with the employer's insurer. Once that claim is approved, any remaining unreimbursed expenses—such as pain‑and‑suffering or higher medical costs—may be pursued through the UIM policy, provided the policy includes "auto‑bodily injury" coverage.

Benefit Limits and Coordination

Workers' compensation typically caps wage replacement at two‑thirds of the employee's average weekly wage, and it does not compensate for pain‑and‑suffering. UIM coverage, on the other hand, can cover these non‑economic damages up to the policy's limit, after the workers' comp benefits are deducted. The UIM insurer will first subtract the workers' comp payout from the total loss before determining the remaining amount payable.

Key Considerations

• Policy language matters: some UIM policies expressly exclude injuries that are also covered by workers' comp.
• State laws vary on "coordination of benefits," affecting how much UIM can pay after workers' comp.
• Timely filing is critical; both workers' comp and UIM claims have strict deadlines.

Typical Payout Example