Car Accident UM-UIM Settlement
Brien Roche
No Duty to Cooperate
Va. Code § 38.2-2206.H says that nothing may be required of the insured except the establishment of liability. Nationwide Mutual v. Sours, 205 Va. 602, (1964) After proper service on the UM/UIM carrier, the only thing to be done is to establish liability. As such your duties are to: serve the carrier and then establish liability. If the carrier calls for more than that, that request may be refused.
Car Accident UM Settlement
1. UIM Cases
In settling UIM cases, the process is fairly simple. There may however be different layers of coverage, so you may have to deal with issues of getting consent of the different layers of coverage. Keep in mind that Va. Code § 38.2-2206(K) does not apply to UM claims.
2. UIM Coverage
Settlement of UIM claims used to be very difficult. There used to be a requirement that the UIM carrier had to consent. A plaintiff can now settle with the liability insurer directly without the consent of the UIM carrier. The release with the liability carrier will only release that liability carrier and their insured, who is also referred to as the “underinsured motorist”. Once the release is signed and payment made then the liability carrier has no further duties to its insured. If the defendant does not sign the agreement, then notice must be given pursuant to Code section 38.2-2206L. You should ask for a copy of the notice and proof that it was sent Certified Mail to the last known address.
A. Completing Discovery
There is some logic in completing your discovery before settling. Once you settle then the at fault driver is out of the case. They will probably be tough to deal with. Defense counsel has some control over them. However that control is minimal.
During a deposition of the released defendant, you may ask about any communications with UIM counsel.
B. Settling with Liability Carrier
i. UM
If you settle with a defendant’s liability carrier without obtaining the UM carrier’s consent, then the UM carrier may claim prejudice as to their subrogation rights. The personal auto policy (PAP) requires a showing of prejudice.
ii. UIM
In instances where the liability carrier and the UIM carrier are the same, then your release should specifically state that it is only the obligations of the liability carrier that are being released.
The settlement under Va. Code §38.2-2206 must be a resolution for the full policy limits or the remaining policy limits.
The release will contain a requirement that the underinsured motorist cooperate with the UIM carrier. Lack of cooperation could be seen in such things as failing to attend a deposition, failing to assist in responding to written discovery, failing to meet with defense counsel, failing to notify the UIM counsel of any change of address.
There is no obligation in the statute or the PAP to notify the UIM carrier of your settlement with the liability carrier. It’s probably a good idea to tell them what you’re doing so that you can negotiate with them but you have no obligation to do anything other than the two things referenced above.
If you’re dealing with a self-insured entity, all of these rules may change.
If the underinsured motorist fails to cooperate with the underinsured motorist’s carrier in the defense of the case then that carrier may pursue a claim for subrogation.
In addition the pertinent language in § 38.2-2206.K says that nothing in this Code section or in § 8.01-66.1:1 creates any duty on the part of any underinsured motorist carrier to defend any underinsured motorist.
If suit is filed then the at-fault motorist must be sued. There probably is no requirement to actually serve that defendant but you should do so to be safe.
The suit against the released defendant must be in the name of that released defendant. If the case proceeds to judgment, then the judgment is entered against “Released defendant” only. It is docketed only against the “Released defendant”.
C. Settling with UIM First
Settling first with the UIM carrier is a possibility. It should only be done in a large case. As stated in Llewellyn v. White, 297 Va. 588, 602 (2019), the defendant is not entitled to a credit for this UIM payment. However if the defendant is the one who arranged for the waiver of subrogation by the UIM carrier, then it is possible that the defendant could receive a credit. If UIM requires a release, which normally they don’t, make sure no culpable person is released.
D. Wealthy Defendant
Before accepting the policy limits of the defendant’s liability carrier where the UIM limits may not be sufficient to satisfy the claim, you should check out the assets of the defendant.
E. Defendant is Deceased
They obviously can’t sign the release and can’t cooperate with the UIM carrier. There probably is some logic in getting the consent of the UIM carrier to such a release and making sure that all of the provisions of Va. Code § 38.2-2206.K through N are incorporated.
F. Settling with One UIM
A plaintiff can settle with a secondary UM carrier without the consent of the primary UM carrier. That is, there is no prejudice to the primary UM carrier. However if the primary UIM policy is a commercial policy, there may be an absolute consent requirement regardless of prejudice. You need to read all of the policies carefully.
There can arise a question where there are multiple UIM carriers involved as to whether or not you need the consent of all in order to settle. To make that decision you need to review the policies carefully. In addition you need to consider that the statute puts the cost of defense on all of the underinsured motorist carriers. As such there is an argument that by settling with one, you have prejudiced the rights of the other to have that contribution from the settling underinsured motorist carrier. Osborne v. National Union Fire, 251 Va. 53 (1996) That may constitute prejudice to the second underinsured motorist carrier.
G. Settling with One Defendant
In a situation where you have more than one defendant or a named defendant and John Doe you probably cannot settle with one defendant without the consent of the UM/UIM carrier. That is, it’s conceivable that the combined liability coverages of the defendants may be sufficient to cover the judgment, in which event there would be no UIM exposure.
In addition if you have multiple defendants and you settle with one of them for less than the policy limits, you may have prejudiced UIM. That could be a bar to recovery.
If you have a named defendant and John Doe and you settle with a named defendant you may have prejudiced the UM. In some of these cases 38.2-2206K may save you. It says that if you settle per this section then the only parties released are the liability carrier and the underinsured motorist. Keep in mind this statute only applies to UIM not to UM.
H. Better Practice
Where the plaintiff has settled with the defendant under Va. Code § 38.2-2206, and there are multiple layers of UIM coverage, the plaintiff can resolve with each UIM carrier up the chain without permission from any of the others.
However the better practice in terms of dealing with UIM #2 is to see if they consent or at least do not object to settling with UIM #1.
Make sure that your release with the liability carrier requires that D cooperate with all UIM carriers.
Check your policy from UIM #2 to see if there is any consent requirement in that policy.
If you do settle without consent then your argument as to why no consent is required is the language in Va. Code section 38.2-2206K which says that settlement is “without prejudice as to any UIM benefits”; 38.2-2206K says that UIM carrier has no duty to defend the at-fault motorist and therefore all UIMs have the same responsibility or lack thereof and there can be no claim of prejudice; UIM #2 can still sue UIM #1 for defense costs if it feels as though it has been prejudiced in some way; if there is no consent requirement in the policy, then that speaks for itself.
I. Additional Things to do After Settling
Where suit has already been filed when you settle, then the suit simply remains as is. If suit has not been filed, then you file suit against the defendant, identify that defendant as the “released defendant”. If you obtain a judgment against the defendant, then the judgment is entered not in the name of the defendant but against the “Released Defendant” and any judgment should state that the UIM is liable for the judgment up to their limits.
J. Court Approval
See Section 38.2-2206(N) for the need for court approval for infant and death cases where you are only accepting the liability payment.
Car Accident UM Settlement-Contact Us
Call or contact us for a free consult. Also for more info on this issue see the Wikipedia pages and see UM coverage