In State Farm Mutual Auto. Ins. Co. v. Jakubowicz, 56 N.E.3d 617 (Ind. 2016) the Supreme Court of Indiana struck down State Farm’s suit limitation clause in its UIM policy which imposed a three-year deadline for pursuing UIM benefits because it conflicted with the policy’s requirement to exhaust the tortfeasor’s liability coverage which created an ambiguity.
The court noted that State Farm could have cured the ambiguity by requiring the insured to sue on a UIM claim within three years after the accident. Alternatively, State Farm could have required the insureds to exhaust the tortfeasor’s coverage before suing for UIM coverage without a time limitation.
Under these type of clauses the insured is required to sue for UIM benefits within a policy-specified period, but can only do so after exhausting the liability coverage. The insured has no ability to enforce the liability insurer to settle.