A new underinsured motorist settlement procedure which was passed by the Virginia General Assembly took effect on January 1, 2016. This new law is a landmark change in how underinsured motorist cases are settled. The new law is intended to help seriously injured people and families who have lost a loved one due to another driver’s negligence.
Underinsured motorist coverage (abbreviated “UIM”) is required on all Virginia auto policies to protect people injured or killed by negligent drivers who do not have enough auto insurance coverage. The negligent driver has auto insurance but not enough — that is why the term “underinsured” is used. The defendant driver is often referred to as “the underinsured motorist.”
Here is how Underinsured Motorist Coverage (UIM) works: Assume you are seriously injured by a negligent driver who has minimum limits auto liability insurance with GEICO — $25,000.00 — and your personal injury case is worth $100,000.00. Your own insurance policy with USAA, for example, has higher limits of $100,000.00, which includes uninsured/underinsured motorist coverage (UM/UIM). Under Virginia law, your UIM benefit is the difference between your UM/UIM policy limit of $100,000.00 and the defendant driver’s liability insurance limit of $25,000.00, i.e., $75,000.00. You are entitled to the defendant’s liability limits of $25,000.00 from his auto insurance company, GEICO, plus $75,000.00 in UIM benefits from USAA (your personal auto carrier) for a total of $100,000.00.
EVERYONE AND VIRGINIA PUBLIC POLICY
Virginia public policy favors early settlement of meritorious personal injury and wrongful death claims where liability of the defendant driver is clear. In our example above, the defendant driver’s liability insurance company (GEICO) does its part by offering its $25,000.00 auto liability limits to you in exchange for a release releasing the defendant driver from liability. Additionally, you bring a UIM claim with your own company, USAA. However, USAA refuses to settle for its $75,000.00 in UIM coverage on the ground that your signing a release with GEICO to obtain its $25,000.00 violates USAA’s subrogation rights (the right to get the money it paid to you back from the defendant driver at the conclusion of the case). Even though you have paid a premium for your UIM insurance coverage, USAA takes the position that they do not have to pay your full UIM benefits until you file a lawsuit, have had a costly trial, and obtained a judgment against the negligent driver.
Under the old UIM settlement procedure, Virginia public policy is often frustrated and so are you, the injured person, as well as the defendant’s liability insurance company, the defendant driver, and the court system. The defendant driver’s insurance company has to spend a lot of money to pay expert witnesses, deposition costs, and trial costs; and you (the injured person) have to do the same. In addition, the defendant driver faces having to pay an excess verdict above his $25,000.00 liability limits back to USAA. Virginia courts are clogged with meritorious UIM cases that should have settled but for the injured person’s UIM carrier withholding full UIM benefits (your $75,000.00) until a judgment against the defendant driver is obtained.
Landmark changes in Virginia’s UIM law take effect for policies issued or renewed after January 1, 2016. These major changes, which are expected to encourage early settlement of meritorious cases, include:
1. Doing away with a UIM carrier’s subrogation rights, provided the defendant driver cooperates with the UIM carrier in the defense of the case;
2. Allowing you (the injured person) to sign a release with the defendant driver’s insurance company without destroying your UIM claim;
3. Taking the defendant driver “off the hook” from paying an excess judgment above his policy limits provided he reasonably cooperates with the UIM carrier in the defense of the case;
4. Requiring the defendant driver to consent to the liability settlement, to sign the release along with the injured person, and to agree to cooperate with the UIM carrier in the defense of the case;
5. Relieving the defendant driver’s liability insurance company (GEICO, in the example) of the duty to defend the negligent driver after payment to you (the injured person) of its available policy limits (in the example – $25,000.00);
6. Requiring the UIM carrier (your insurance company – USAA in the example), the “real party in interest”, to pay all defense costs once the defendant driver’s insurance company has paid to you (the injured person) its available liability policy limits.
You have been injured in an auto accident. Your lawyer accepts the defendant driver’s insurance company’s (GEICO’s) offer to settle your personal injury liability claim for its policy limits of $25,000.00. You and the defendant driver must sign a Release — releasing the defendant from all liability to you. The release must contain a notice to the defendant driver describing the new 2016 settlement procedure and the defendant driver’s duty to reasonably cooperate with your insurance company, USAA (the UIM carrier), in its defense of the case. If the negligent driver fails to reasonably cooperate, USAA’s subrogation rights against him are revived and USAA would then be allowed to get any UIM payment it made to you (the injured person) back from the defendant driver.
Once both you and the defendant driver sign the liability carrier’s release, the liability settlement with GEICO is finalized. “Upon payment” to you by GEICO (the defendant driver’s liability insurance company), USAA’s subrogation rights are terminated along with GEICO’s duty to defend the negligent driver. The cost of defense is now shifted to the “real party in interest” – USAA, the UIM carrier holding the remaining UIM settlement money.
The reason the Virginia legislature enacted these sweeping, landmark changes to the UIM settlement procedure was to end the long delay in settlement of meritorious UIM claims when the defendant driver’s liability carrier has already offered its available policy limits.
Hopefully, now, the legislative purpose of UIM coverage and the public policy for early settlement of meritorious UIM personal injury and wrongful death cases will be achieved beginning in 2016.
Gerald Schwartz is a past President of the Virginia Trial Lawyers Association who specializes in Personal Injury and Wrongful Death law with over 30 years experience representing injured people and families who have lost loved ones. He is a leading expert in Virginia Underinsured Motorist coverage. Schwartz has been invited by the Virginia Trial Lawyers Association to present a 3 hour seminar to other lawyers on the new Virginia Underinsured Motorist settlement procedure during the morning session of VTLA’s May 2016 Tort Law Seminar:
Richmond, Virginia — May 5, 2016 Roanoke, Virginia — May 16, 2016 Fairfax, Virginia — May 18, 2016 Virginia Beach, Virginia — May 25, 2016
If you would like to attend this seminar, please contact the Virginia Trial Lawyers Association at 804-343-1143.