Car Accident UM Coverage
Brien Roche
The topic of uninsured/underinsured (hereafter referred to as UM unless the context requires otherwise) motorist coverage in Virginia is complex. Gerry Schwartz has written a very excellent article on the topic that is the subject of CLEs in Virginia. That article is a good overview and analysis of UM law. What he recommends is that you first read the policy. You then read the statute. You then read the case law that may apply to the policy and statute.
The pertinent statute is Virginia Code § 38.2-2206.
Car Accident UM Coverage-General Principles
It begins in subsection A by saying that the policy must pay “…the insured all sums that he is legally entitled to recover as damages….” The term “all sums” becomes critical because what carriers do is to provide for certain set-offs. A set-off may be found in a clause within the policy entitled “Limits of Liability”. It also may be found in a policy provision entitled “Other Insurance”. Those types of set-offs, to the extent that they diminish the amount that the insured is legally entitled to, are invalid.
In a typical such clause the policy may say that the uninsured motorist payments are reduced by any liability payments made to a plaintiff under the same policy. Such a set-off is invalid as to the named insured and may be invalid as to a passenger who is simply an insured. Typically that is not an issue because the UM limits are the same as the liability limits.
Premiums
One question that people may ask in terms of making a UM/UIM claim is what effect that is going to have on their premiums. Assuming the crash was not their fault, then it should not have any effect on their premiums or under any safe driver insurance plan. Virginia Code § 38.2-1905
Car Accident UM Coverage-Specific Rules
1. The State Law Where the UM Policy was Issued Controls the Analysis
For instance the plaintiff has UIM policy that is issued in Florida. The plaintiff is involved in a crash with a defendant in Virginia. The defendant’s policy limits are offered. Florida law will control how, when and with what restrictions you can accept the liability limits of the defendant.
If the UM policy is a Virginia policy, then you’re going to be governed by the Virginia statute as far as that coverage. Where both the liability carrier and the UIM carrier agree that they are going to be bound by the Virginia statute, then you’re fine. If they don’t agree, then you probably have two (2) options: (a) accept the liability funds only when you have a settlement agreement with the UIM; (b) get all parties to sign off on a court order confirming who is released and who has any ongoing obligations.
2. Determine the Liability Coverage.
A. Turn Over Every Rock to Determine Coverage.
See the blog post on this site on liability coverage to get a full grasp of where liability coverage may be found.
B. What is Available?
The statute defines the term “available for payment”. It means the amount of liability coverage reduced by the payment of any other claims arising out of the same occurrence. For instance three people are injured in one collision. Total policy is $100,000. The amount available for your plaintiff may only be $25,000. The other $75,000 may have been paid to the two other claimants. Normally in a case like that a liability carrier will not settle with any one claimant unless they can settle with all three. That settlement may involve the payment of the entire policy in equal amounts. Or it may involve pro-rata payments based upon the size of each claim.
C. Defendant has Coverage Less than the Statutory Minimum.
If the liability coverage is from another state, you need to know what that state law mandates. Virginia has a statutory minimum of liability coverage. That is, if you have coverage, it has to be at least that much. In Virginia you’re not required to have coverage. You can simply pay an uninsured motorist fee and avoid having coverage. If you don’t have the statutory minimal coverage, then you are deemed to be uninsured. For instance if your policy is $10,000, then you’re deemed to be uninsured. That means that the plaintiff’s uninsured coverage would apply in toto. The result of that is that if the defendant’s policy is $10,000 and the uninsured motorist coverage is $25,000, the total recoverable is $35,000. See Virginia Code § 46.2-472 and 38.2-2206.B and Reliance Ins. Co. v. Darden, 217 Va. 694 (1977)
In Reliance, the issue was whether the “deemer clause” actually increased the coverage in Virginia. In Virginia there is no mandatory minimum. That is, you can simply pay the UM fee and have no coverage. You need to read the policy language to see if the deemer clause actually increases the coverage to Virginia’s minimum allowed coverage. If it doesn’t, then you have a UM claim. If it does, then if you may have a UIM claim.
D. John Doe Cases.
In some instances the at-fault motorist is never identified. That is referred to as a “John Doe” case. That motorist may not be identified because the motorist simply left the scene or it may have been a non-contact incident where there was no actual contact between the vehicles. The other vehicle then left the scene perhaps not even knowing that there was a resulting crash. These no-contact cases must be reported promptly to the insurer or to local law enforcement.
There is no obligation to identify that unknown motorist per Mangus v. Doe, 203 Va. 518, 520 (1962). The better practice is to do so. For all you know, that unknown motorist could have $10,000,000 in coverage. If the UM coverage is only $50,000, you may have trouble explaining your failure to pursue this.
E. John Doe and Others.
In an instance where you sue a “John Doe” and also sue an at-fault driver, if your verdict is only against John Doe, then the uninsured motorist carrier pays. If the verdict is against both John Doe and the known defendant, then the liability carrier pays. If however that verdict is over the liability limits, then the liability carrier pays its limits and the UIM carrier pays up to its limits. The UIM carrier however retains its right of subrogation so in most cases the liability carrier pays the entire amount. Harleysville v. Nationwide, 789 F.2d 272.
3. Car Accident UM Coverage-Is there Coverage?
UIM coverage is much more complex than is UM coverage. It applies where there is liability coverage but not enough. To determine if there is UM or UIM coverage, there are several things to look at:
A. Vehicle Use.
If the vehicle is being used for a drive-by shooting, there probably is no coverage. Travelers Insurance Company v. LaClair, 250 Va. 368 (2002)
B. Gradations of Insured.
1. Named Insured
The statute defines the term “insured” to consist of the named insured and then the “insured”. Named insured includes the person who is actually named on the Declaration Page of the policy. Also that term includes the spouse, relatives, wards or foster children of either spouse living in the same household while in a motor vehicle or otherwise.
What that mean is that the spouse may be a named insured. Children may be a named insured. Even foster children may be a named insured. It makes no difference whether they’re in a motor vehicle or not in a vehicle.
As such as a pedestrian would be covered. They may be in a public bus and they would be covered. May be driving a non-owned vehicle without permission and they are covered under their policy but not under the policy of the owner. They may be driving an owned vehicle that is uninsured. As Gerry Schwartz says, “The way to think of the named insured is that the uninsured motorist policy is actually glued to that person.” That coverage follows the person wherever that person goes.
2. Insured
The second class of persons under a policy are referred to as “the insured”. The insured is any person who uses the motor vehicle to which the policy applies with the express or implied consent of the named insured or a reasonable belief by the operator that he is a permissive user. If the operator for whatever reason becomes uninsured, then the passenger is still covered by UIM as long as the vehicle was being used as a vehicle.
The insured includes a passenger in an automobile. This applies also if the vehicle is either a temporary substitute auto or what is called a “non-owned auto”. As such the passenger in this circumstance is entitled to all of the same uninsured motorist coverage that the driver is entitled to.
This second class coverage applies where a student is crossing the road to a school bus, a person is changing a flat tire, a highway worker is placing road signs or a construction manager is giving hand signals to a truck driver. It may not apply where a person who is simply a listed driver is doing these same things.
C. Priority of Vehicles.
1. Look at Occupied Vehicle First.
Normally the coverage on that vehicle is going to be primary. The two exceptions to that are self-insured vehicles and garage vehicles.
a. But- Self-Insured.
To the extent that a vehicle owner is self-insured, their entire coverage may be available in spite of any statutory language allowing them to limit their coverage. See the case of VACORP v. Young, 298 Va. 490 (2020). A self-insured entity however does have certain benefits/protections: (1) It is not required to have the same UM/UIM coverage as its liability coverage. (2) If there is another UIM carrier/entity in the case, then the self-insured entity gets the full credit under Virginia Code § 38.2-2206.B. (3) Likewise the self-insured entity gets the full credit under Virginia Code § 46.2-368 for purposes of payment. Catron v. State Farm, 255 Va. 31 (1998)
b. But- Garage-Keeper’s Policy.
A garage-keeper’s policy which normally is not primary for purposes of liability may be primary for purposes of UM/UIM.
2. Look at the Plaintiff’s Home.
It is possible the plaintiff may be insured under a relative’s policy. You need to identify those relatives, their policies and the amount of coverage. The issue comes down to what is a household and is the plaintiff a member of that household. In addition there may be an issue of whether the plaintiff could be a member of two households. Brogdon v. Clark, 63 Va. Cir. 85 (2003)
4. Car Accident UM Coverage-What is the Amount of Coverage?
A. Stacking.
It used to be that stacking within a policy was allowed. That is, if there are several vehicles on the policy, then the UM coverage could be stacked one vehicle on top of the other. Now that is disallowed in most policies except where the limit of liability is ambiguous or there is different UM coverage. What is allowed however is inter-policy stacking. For instance three minimum limits resident relative policies could be stacked to add up to $75,000 UM, resulting in $50,000 total UIM where there is only $25,000 liability.
B. Is there Liability and UIM Coverage from the Same Policy?
Imagine your car is insured for $50,000 liability and UM/UIM. The car is driven with permission by friend #1. Friend #2 is a passenger and is injured. Friend #1 and UM are at fault. Friend #2 is entitled to $50,000 liability and $50,000 UIM. However a passenger in a single auto accident (rollover or plaintiff is passenger in a vehicle driven by the only at-fault driver) cannot stack the uninsured motorist coverage from the driver’s policy. Trisvan v. Agway Ins. Co., 254 Va. 416 (1997)
C. Split Limits
In cases where the UM limits are split limits, the split limits only apply where you have multiple claimants. If the split limits are 250/500 and there is only one claimant against multiple defendants, then the UM coverage is $250,000. However if you have two claimants, then each claimant could recover up to $250,000 with a total payout of no more than $500,000. If you have three claimants, then no one of them can recover more than $250,000 but the total payout could be $500,000.
With one claimant and two defendants, one of whom has $50,000 in liability coverage and the other has $100,000 and your UM limits are split at 250/500, then the total recovery probably would be $400,000. As to Defendant #1, you can get the $50,000 liability plus up to $200,000 UM. As to Defendant #2, you can get the $100,000 liability and then up to $50,000 UM, since that is all that is remaining on the UM coverage. The total recovery under that scenario would be $400,000, although it is possible that your total recovery could be $500,000 on the theory that the UM limits are $500,000 even though all of that in a typical situation would not be available to a single plaintiff.
D. UM Coverage Different than Liability Coverage
An insured does have a right to pick UM coverage that is less than the liability coverage. That selection must be signed by the insured with the appropriate box checked. Under White v. National Union Fire, 913 F.2d 165 (4th Cir. – 1990) the intent of the parties is irrelevant. The form must be returned with the lesser coverage box checked otherwise the two coverages are identical.
5. Priority of UIM.
The statute sets forth an order of priority. That order of priority applies to instances where there is more than one policy. Any credits that are to be applied shall be likewise credited in the same order of priority. The order of priority is the following:
- The policy covering the vehicle carrying the plaintiff.
- Policy covering a vehicle not involved in the crash under which the plaintiff is a named insured.
- The policy covering a vehicle not involved in the crash under which the plaintiff is simply an insured.
- Where there is more than one insurer providing coverage under one such priority, then their responsibility is pro-rata based upon their overall coverage.
A. Apply the Credits.
The credit is the total amount of liability coverage insuring the defendant subtracted from the total UIM coverage available to the plaintiff. It is that difference that is paid to the plaintiff. That means that a first priority carrier may be given a credit whereas a second priority carrier may not receive that same credit. The statutory credit can become much more complicated when you have multiple sources of liability coverage and/or multiple sources of uninsured motorist coverage.
This credit is only applied in UIM cases.
B. Credit Example.
Using an example from Gerry Schwartz’s article, assume that Plaintiff has a $100,000 judgment. Defendant’s liability coverage is $50,000. Plaintiff has $50,000 UM coverage on his vehicle and is also insured under his mother’s vehicle for an additional $50,000 UM coverage. The Plaintiff has a total of $100,000 in UM coverage. Plaintiff is underinsured by $50,000. His carrier gets the credit for the $50,000 liability coverage and therefore pays nothing. His mother’s carrier however pays the additional $50,000.
The statutory credit only applies in UIM cases.
6. Rules Where You Have Multiple Plaintiffs or Multiple Defendants.
A. Calculate Available Coverage for all Defendants:
D1 – $100,000
D2 – $50,000
D3 – $25,000
B. Calculate All UIM Coverage for Plaintiffs:
P1 – $300,000
P2 – $400,000
C. Overall Claim is Worth $500,000 in Terms of Value of the Case
D. Result:
D1 pays $100,000
P1 gets $200,000 UIM
D2 pays $50,000
P1 gets no UIM as to D2 since limits have been exhausted.
D3 pays $25,000
P1 gets no UIM as to D3 since limits have been exhausted.
P1’s total recovery is $375,000.
As to P2:
A. If liability limits are split, then P2 may be able to get same liability limits as P1, otherwise liability limits are shared.
B. P2’s UIM recovery is governed by liability limits against the total UIM, assuming the limits are split, otherwise P2 shares with P1.
Where you have multiple claimants against the liability coverage, there may be some logic in getting the consent of the UIM carrier before settling.
The alternative is to try to reach an agreement whereby two of the claimants take all of the liability coverage. The third claimant then goes exclusively against their UIM coverage. If the carrier is unwilling to do this, then you can file suit as to the two claimants with the third one holding off on filing or serving. That way the rights of the UIM carriers are not being prejudiced in any way.
Example 1:
Defendant 1 has liability coverage of $50,000. Defendant 2 has liability coverage of $100,000. Plaintiff has total UIM coverage of $200,000. Defendant 1 gets the credit for $50,000, leaving UIM coverage of $150,000 as to Defendant 1. As to Defendant 2, UIM limits have been used up and therefore there is no money due as to that defendant. Therefore the total recovery is $150,000 on the liability coverage and $150,000 on the UIM coverage.
Example 2:
Plaintiff is a passenger in a vehicle involved in a 3-car crash and is permanently injured. All 3 drivers are at fault. The vehicle that the plaintiff was in has $50,000 in coverage. Vehicle 2 has $25,000 in coverage. Vehicle 3 has $100,000 in coverage. There are also 2 policies held by relatives living in plaintiff’s household. They each have $50,000 in coverage. The question is, what is the maximum amount of coverage available to plaintiff?
Liability and UM Coverage
First you need to calculate the total liability coverage:
Host vehicle: $50,000.00
Vehicle #2: 25,000.00
Vehicle #3: 100,000.00
Total $175,000.00
Next, calculate the total of UM coverage:
Host vehicle: $50,000.00
Household Vehicle: 50,000.00
Household Vehicle: 50,000.00
Total $150,000.00
UIM Coverage
Next calculate the amount of underinsured motorist (UIM) coverage. Keep in mind that a vehicle is underinsured to the extent that the liability coverage is less than the total uninsured motorist coverage. To do this you must look at each vehicle separately. A vehicle in which the plaintiff is a passenger typically cannot provide both liability coverage to the driver and UIM coverage to a passenger. As a result there is no UIM benefit under the host vehicle policy for the host’s liability.
Vehicle 2 and 3
As to vehicle #2, this vehicle is underinsured by $125,000 because there is $150,000 in available UM coverage and only $25,000 in liability coverage. The host vehicle does get a credit for the $25,000 in liability coverage. Therefore the host vehicle will pay $25,000 in UIM benefits. Vehicles #2 and #3 will pay their policy limits each of $50,000.
As to Vehicle #3, this vehicle is underinsured by $50,000. Vehicles #2 and #3 have paid their full policy limits and therefore they are not further exposed. The host vehicle has only paid $25,000 of its UM coverage. If the host vehicle is entitled to a credit, then the plaintiff will recover the $175,000 in liability coverage plus $125,000 in UIM benefits.
Example 3:
Take the case of where three family members are injured in the same covered vehicle. The liability coverage is 25/50. The UIM coverage is 50/100.
If you imagine that the first plaintiff goes to trial and gets a verdict over $50,000, then that person gets $25,000 and $25,000 from the UIM for a total of $50,000.
Imagine that plaintiff #2 goes to trial and gets a verdict over $50,000. That person gets $25,000 from liability and $25,000 from the UIM for a total of $50,000.
At this point the liability coverage is exhausted and therefore the tortfeasor is uninsured as to the third plaintiff. There is a total of $50,000 left in UIM money. If the third plaintiff goes to trial and gets a verdict in excess of $50,000, then the UM policy pays $50,000.
Example 4:
Plaintiff is a pedestrian and has six (6) auto policies where he is the named insured with UIM coverage of 100/300 on each policy, therefore he has a total UIM coverage of $600,000. There are two (2) defendant drivers. Defendant #1 has liability coverage of $25,000. Defendant #2 has liability coverage of $100,000.
The proper analysis is to look at each defendant separately. As to Defendant #1, the liability coverage is $25,000. The total UIM coverage is $600,000, therefore leaving coverage of $575,000. Defendant #2 has liability coverage of $100,000. The UIM coverage is $600,000, therefore the UIM coverage is $500,000. The total UIM coverage therefore after offsets is $1,075,000. That however has to be reduced to the available coverage of $600,000. Therefore the total recovery is $600,000 from UIM, plus $125,000 of the liability coverage for a total recovery of $725,000.
Two Quirks
Two little quirks about this scenario:
- The per person total limit of $600,000 applies, not the per accident limit since there is only one claimant.
- The offset as to Defendant #2’s liability coverage of $100,l000 is technically applied to each UIM policy but it would be at the rate of $16,666.66 per policy for a total offset of $100,000.
Example 5:
You get a verdict against two defendants. Defendant 1 has $25,000 in coverage. Defendant 2 has $50,000 in coverage. Your verdict is for $35,000. The UIM coverage is $100,000. In this instance, the UIM coverage does not kick in. The liability coverage from the two defendants is sufficient to cover the verdict. This liability coverage must be exhausted before UIM kicks in.
Car Accident UM Coverage-The Role of UIM Counsel
If your case goes to trial and UIM counsel, either as part of the pre-trial proceedings or otherwise, wishes to take part independently in the proceedings, you should be prepared to raise objection to that if appropriate. In Transportation Insurance Co. v. Womack, 284 Va. 563, 565 (2012), the court said that Code § 33.2-2206.F allows a UIM carrier to defend a case at trial where the interest of the carrier and the named defendant diverge. That occurs in particular in an instance where the defendant has abandoned the case.
If the carrier intends to present a defense independent of what the defendant has asserted, then in that instance their interests do diverge. In most instances however the interest of the two does not diverge because they both have the same interest in keeping the verdict as low as possible. In State Farm Mutual Auto Insurance Co. v. Cuffee, 248 Va. 11 (1994) and State Farm Mutual Auto Insurance Co. v. Beng, 249 Va. 165 (1995), the court dealt with instances where the interest of the carrier and the defendant clearly did diverge.
If UIM counsel is the only defense counsel in the case, you should pin them down as to who they represent. That is, is defense counsel only representing the interest of the carrier or are they formally representing the defendant? What you want to avoid is defense counsel at the last minute announcing that they now represent the defendant. In particular they should under no circumstances be allowed to state that they represent the “released defendant”. That is prejudicial to the plaintiff.
You’re not allowed to identify defense counsel as being insurance counsel. However you can come close to that. You can point out to the jury that the unknown defense has hired a lawyer. They have hired doctors to testify against the plaintiff. They have conducted discovery.Car Accident UM Coverage-Punitive Damages
Under the case of Allstate v. Wade, the underinsured carrier must pay punitives even after settling with the liability carrier. The statute requires that the carrier pay “all sums”. However there is a possible argument that since Allstate v. Wade involved an instance where the carrier voluntarily gave up subrogation, punitives are not covered. Under the current Code section, subrogation is stripped away from the carrier. That argument probably doesn’t have a lot of merit but it is something to consider.
If you have a viable punitive claim, you need to take the deposition of the defendant before settling.
You should probably also confirm with the UIM carrier that it agrees that punitive damages are covered. If there is any disagreement on that then you may be looking at a separate declaratory action.
Workers’ Comp Cases
In some instances the plaintiff may be an employee of the owner or operator of a motor vehicle. If the employer paid workers’ comp benefits to the plaintiff, then the employer has a right of subrogation. If the employer likewise paid for the uninsured motorist coverage on the vehicle that the plaintiff was driving or riding in, then the workers’ comp lien may attach to that uninsured motorist coverage. Should the UIM carrier attempt to deny coverage because the vehicle is being used in employment-related activity, this is violative of the “all sums” language in Virginia Code § 38.2-2206A.
Contact Us
Call or contact us for a free consult. Also for more info on this issue see the Wikipedia pages and Car Accident UM Settlement.