Virginia has made changes to its underinsured motorist law that will take effect on July 1, 2015. The changes come with the addition of Va. Code § 8.01-66.1:1, and with amendments to Va. Code § 38.2-2206. The major impact of these changes is that they shift the burden of defending a suit to the underinsured motorist carrier once the liability carrier pays its policy limits to the plaintiff/claimant, and they end most subrogation rights formerly enjoyed by a UIM carrier against the tortfeasor.
The newly written § 8.01-66.1:1 concerns the subrogation rights of an underinsured motorist carrier. This statute now requires that no UIM carrier shall be permitted to subrogate against an underinsured motorist who settled with the plaintiff/claimant, unless that underinsured motorist failed to provide reasonable cooperation to the UIM carrier. The statute provides four examples of failure to provide reasonable cooperation:
- failure to attend a deposition or trial if subpoenaed 21 days in advance;
- failure to assist in responding to written discovery;
- failure to confer with defense counsel within 21 days of being served, or before to a deposition or trial; and
- failure to notify the UIM carrier of a change in address. Before the enactment of § 8.01-66.1:1, there was no Virginia law preventing a UIM carrier from subrogating against an underinsured motorist.
Changes to Va. Code § 38.2-2206 include amendments to Sections K and L, and the addition of Sections M and N. The new provisions only apply to policies written after January 1, 2016. The changes and additions are as follows:
Section K: A liability carrier that has settled with an underinsured plaintiff/claimant for policy limits must obtain a release from the plaintiff/claimant. After obtaining this release and paying its limits, the liability carrier has no further duties to its insured, including the duty to defend the insured in any action.
Section L: The settlement must be in writing, include a specific written notice to the underinsured motorist, and be signed not only by the plaintiff/claimant but also by the underinsured motorist. The requirement for the signature of the underinsured motorist is waived if the liability carrier sends a copy of the required notice to the underinsured motorist by certified mail, return receipt requested.
Section M: Lawsuits brought by a plaintiff/claimant after the liability carrier has paid its limits shall name the liability carrier’s released insured as the defendant, and any action already pending against such a defendant shall continue. If the lawsuit results in a verdict against the defendant, judgment shall be entered in the name of “Released Defendant,” and shall be enforceable against the UIM carrier, up to the amount of its limits in excess of the liability coverage.
Section N: Payments made to the personal representative of a person under a disability or of an estate in a wrongful death action are not required to be courtapproved. Unapproved settlement payments must be made to the attorney for the personal representative to be held in trust, or paid into court.
These changes represent a significant change in how UIM claims/cases have been approached in Virginia through the years. The new statutes now place more of a burden on UIM carriers to become involved earlier in cases and to have “some skin in the game.” Please contact one of the members of the Coverage & Casualty Group listed below to discuss these changes further.