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Uninsured/Underinsured Motorist Coverage

Fairfax Injury Lawyer Brien Roche Addresses Uninsured/Underinsured Motorist Coverage

Brien Roche

The topic of uninsured/underinsured motorist coverage in Virginia is complex to say the least.  Gerry Schwartz wrote a very excellent article on the topic that appeared in the Journal of Virginia Trial Lawyers in the summer of 1995.  That article is a good overview and analysis of uninsured motorist 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. 

My approach is a little bit different.  I operate on the premise that the statute sets forth the minimum coverage that the carriers must provide.  A policy may add additional coverage but it cannot decrease that minimum coverage that the statute mandates.  The case law then interprets both the statute and the policies in particular cases.

As such I am going to start with the statute.

The pertinent statute is Virginia Code § 38.2-2206.

Uninsured/Underinsured Motorist Coverage-The Statute

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 from the owner or operator of an uninsured motor vehicle” with limits not less than the statutory minimum which currently is $25,000.  The term “all sums” becomes critical because frequently what carriers try to 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 certainly invalid as to the named insured and may be invalid as to a passenger who is simply an insured.  

Named Insured vs. Insured

The statute defines the term “insured” to consist of the named insured and then the “insured”.  The 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 means 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 they would be covered by the uninsured motorist policy.  They may be in a public bus and they would be covered.  

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.  This includes a passenger in the motor vehicle.

Named Insured Has Greater Rights

The named insured has greater rights than does the insured.  

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.  Another simple aphorism of insurance law is that coverage follows the vehicle.  What that means is that in trying to determine what liability coverage is primary, that primary coverage is the one that follows or is on the 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.  However if the driver does something to void coverage for himself, this does not mean that the coverage is voided for the passenger.

Example

To borrow the example Gerry Schwartz uses in his article, Maryanne and Rebecca borrow Paul’s car and are injured as a result of the fault of Maryanne and Mr. Jones, an uninsured driver.  Paul’s limits are $50,000 liability and UIM per person.  Rebecca (the passenger) can claim Paul’s uninsured motorist coverage.  Maryanne, the driver of Paul’s car at the time of the crash, lives with her grandfather who has a separate policy with uninsured motorist limits of $100,000.  Also Rebecca can claim the uninsured motorist coverage under that same policy.  As such Rebecca’s total coverage is $150,000 in liability coverage from the two policies and $150,000 in uninsured motorist coverage under the two policies for a total of $300,000.

There is no credit applied in that case because Mr. Jones is uninsured.

Uninsured/Underinsured Motorist Coverage-Available for Payment

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 if there are three people injured in one collision and the total policy is $100,000, then 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 overall claim.  

Priority

The statute then goes on to set forth an order of priority.  That order of priority applies to instances where there is more than one underinsured motorist policy.  Any credits that are to be applied shall be likewise credited in this 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.  

The term “available for payment” is important in defining whether a vehicle is uninsured.  If the at-fault motorist has a $25,000 policy and $10,000 is paid out, then the amount available is $15,000. Where the plaintiff has $100,000 of underinsured motorist coverage, then the amount available for payment is $85,000.

Two or More Defendants

If you have a case with two or more defendants and defendant #1 has liability coverage of $50,000 and defendant #2 has liability coverage of $75,000 then you have a total of $125,000.  If the available underinsured motorist coverage is $100,000, then that means the first defendant is underinsured by $50,000 and the second is underinsured by $25,000 for a total of $75,000.  

Credits

Credits are applied in the same order of priority as is the coverage.  That means that a first priority carrier may be given a credit whereas a second priority carrier may not receive that same credit.

The credit is only applied in underinsured motorist cases, not in uninsured motorist cases.

The calculation of actual coverage is determined by first calculating all of the uninsured motorist coverage.  You then calculate all of the available liability coverage for that defendant.  This amount has to be reduced by payments made to other claimants from that same crash.  You then subtract the liability coverage from the available uninsured motorist coverage and that tells you the amount of underinsured motorist coverage.  

The idea of the statutory credit can become much more complicated when you have multiple sources of liability coverage and/or multiple sources of uninsured motorist coverage.

Uninsured/Underinsured Motorist Coverage-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 that did not make contact 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 ten million dollars in coverage. If the UIM coverage is only $50,000 you may have trouble explaining your failure to pursue this.

Settlement

Settlement of uninsured motorist claims used to be very difficult.  There used to be a requirement that the uninsured motorist carrier had to consent.  That consent requirement has now been deleted.  A plaintiff can now settle with the liability insurer directly without the consent of the uninsured motorist 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 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.

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.

After Settling With Liability Carrier

Likewise the underinsured motorist carrier has no right of subrogation against the underinsured motorist.  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 I think it may be a good practice to do so.  The alternative is to get some confirmation from the UIM lawyer that there is no need to serve the released defendant.  As to the released defendant, if that person has counsel, then keep that person on your Certificate of Service and send them all pertinent pleadings.  The underinsured motorist carrier is going to pick up any responsibility for that defendant.  

Uninsured/Underinsured motorist Coverage-Stacking

It used to be that stacking within a policy was allowed.  That is, if there are several vehicles on the policy, then the uninsured motorist coverage could be stacked one vehicle on top of the other.  Now that is disallowed in most policies.  What is allowed however is inter-policy stacking.  

To determine exactly how that works, you need to first calculate the total coverage from each policy that provides the plaintiff uninsured motorist coverage.  You then deduct from that the total coverage on each liability policy that covers each defendant.  However a passenger in a single auto accident cannot stack the uninsured motorist coverage from the driver’s policy.  Trisvan v. Agway Ins. Co., 254 Va. 416 (1997)

If you have two parties that are at fault for the crash, then you do that per party.  Assume the total available uninsured motorist coverage is $250,000.  The total liability coverage for a single defendant is $100,000.  The available coverage then is $150,000.  

Credit Example

These calculations can also get into the application of what is called “the credit”.  Using an example from Gerry Schwartz’s article, assume that the plaintiff has a $100,000 judgment.  The defendant’s liability coverage is $50,000.  Plaintiff has $50,000 uninsured motorist coverage on his vehicle and is also insured under his mother’s vehicle for an additional $50,000 uninsured motorist coverage.  The plaintiff has a total of $100,000 in underinsured coverage.  The 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 underinsured motorist cases.  

Consent to Settle

There can arise a question where there are multiple underinsured motorist 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 policy 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.  

Better Practice

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.  If that’s not forthcoming:

  • Make sure that your release with the liability carrier requires that the defendant 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.

If the policy is one issued outside of the state of Virginia, then it may be that any right to settle is governed by the law of that state where the policy was issued.

Uninsured/Underinsured Motorist Coverage-What State Law Controls

In uninsured motorist cases there can arise a question of what state law is controlling.  Typically the rule is that if the question applies solely to the content of the policy i.e., is purely a contractual question, then it is probably going to be the law of the state where the policy was issued.  If however it’s a tort issue that exists, then Virginia is going to apply Virginia tort law if in fact that’s where the injury occurred.

For instance the plaintiff has a 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.  

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.  

Self-Insured Entity

To the extent that a defendant 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, 840 S.E.2d 334 (2020).

Defendant Has Coverage Less than the Statutory Minimum

The current statutory minimum of liability coverage in Virginia is $25,000.  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 however you have coverage that is purchased in Virginia, then it must be at least $25,000.  If you don’t have that much 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 coverage you have is $35,000.  See Virginia Code Section 46.2-472 and 38.2-2206.B and Reliance Ins. Co. v. Darden, 217 Va. 694 (1977)

UM Claim-Scenario One

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 the plaintiff’s household.  They each have $50,000 in coverage (household coverage).  The question is, what is the maximum amount of coverage available to the 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 such there is no UIM benefit under the host vehicle policy for the host’s liability.

As to Vehicle #2, this vehicle is underinsured by $125,000.00 because there is $150,000.00 in available UM coverage and only $25,000.00 in liability coverage.  The host vehicle does get a credit for the $25,000.00 in liability coverage.  Therefore the host vehicle will pay $25,000.00 in UIM benefits.  Vehicles #2 and #3 will pay their policy limits each of $50,000.00.

As to Vehicle #3, this vehicle is underinsured by $50,000.00.  Vehicles #2 and #3 have paid their full policy limits and therefore they are not further exposed.  The host vehicle has only paid $25,000.00 of its UM coverage.  If the host vehicle is entitled to a credit then the plaintiff will recover the $175,000.00 in liability coverage plus $125,000.00 in UIM benefits.

Contact

Call, or contact us for a free consult. Also for more info on this issue see the Wikipedia pages.

Also see auto liability coverage

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Uninsured/Underinsured Motorist Coverage

Fairfax Injury Lawyer Brien Roche Addresses Uninsured/Underinsured Motorist Coverage

Brien Roche

The topic of uninsured/underinsured motorist coverage in Virginia is complex to say the least.  Gerry Schwartz wrote a very excellent article on the topic that appeared in the Journal of Virginia Trial Lawyers in the summer of 1995.  That article is a good overview and analysis of uninsured motorist 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. 

My approach is a little bit different.  I operate on the premise that the statute sets forth the minimum coverage that the carriers must provide.  A policy may add additional coverage but it cannot decrease that minimum coverage that the statute mandates.  The case law then interprets both the statute and the policies in particular cases.

As such I am going to start with the statute.

The pertinent statute is Virginia Code § 38.2-2206.

Uninsured/Underinsured Motorist Coverage-The Statute

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 from the owner or operator of an uninsured motor vehicle” with limits not less than the statutory minimum which currently is $25,000.  The term “all sums” becomes critical because frequently what carriers try to 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 certainly invalid as to the named insured and may be invalid as to a passenger who is simply an insured.  

Named Insured vs. Insured

The statute defines the term “insured” to consist of the named insured and then the “insured”.  The 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 means 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 they would be covered by the uninsured motorist policy.  They may be in a public bus and they would be covered.  

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.  This includes a passenger in the motor vehicle.

Named Insured Has Greater Rights

The named insured has greater rights than does the insured.  

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.  Another simple aphorism of insurance law is that coverage follows the vehicle.  What that means is that in trying to determine what liability coverage is primary, that primary coverage is the one that follows or is on the 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.  However if the driver does something to void coverage for himself, this does not mean that the coverage is voided for the passenger.

Example

To borrow the example Gerry Schwartz uses in his article, Maryanne and Rebecca borrow Paul’s car and are injured as a result of the fault of Maryanne and Mr. Jones, an uninsured driver.  Paul’s limits are $50,000 liability and UIM per person.  Rebecca (the passenger) can claim Paul’s uninsured motorist coverage.  Maryanne, the driver of Paul’s car at the time of the crash, lives with her grandfather who has a separate policy with uninsured motorist limits of $100,000.  Also Rebecca can claim the uninsured motorist coverage under that same policy.  As such Rebecca’s total coverage is $150,000 in liability coverage from the two policies and $150,000 in uninsured motorist coverage under the two policies for a total of $300,000.

There is no credit applied in that case because Mr. Jones is uninsured.

Uninsured/Underinsured Motorist Coverage-Available for Payment

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 if there are three people injured in one collision and the total policy is $100,000, then 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 overall claim.  

Priority

The statute then goes on to set forth an order of priority.  That order of priority applies to instances where there is more than one underinsured motorist policy.  Any credits that are to be applied shall be likewise credited in this 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.  

The term “available for payment” is important in defining whether a vehicle is uninsured.  If the at-fault motorist has a $25,000 policy and $10,000 is paid out, then the amount available is $15,000. Where the plaintiff has $100,000 of underinsured motorist coverage, then the amount available for payment is $85,000.

Two or More Defendants

If you have a case with two or more defendants and defendant #1 has liability coverage of $50,000 and defendant #2 has liability coverage of $75,000 then you have a total of $125,000.  If the available underinsured motorist coverage is $100,000, then that means the first defendant is underinsured by $50,000 and the second is underinsured by $25,000 for a total of $75,000.  

Credits

Credits are applied in the same order of priority as is the coverage.  That means that a first priority carrier may be given a credit whereas a second priority carrier may not receive that same credit.

The credit is only applied in underinsured motorist cases, not in uninsured motorist cases.

The calculation of actual coverage is determined by first calculating all of the uninsured motorist coverage.  You then calculate all of the available liability coverage for that defendant.  This amount has to be reduced by payments made to other claimants from that same crash.  You then subtract the liability coverage from the available uninsured motorist coverage and that tells you the amount of underinsured motorist coverage.  

The idea of the statutory credit can become much more complicated when you have multiple sources of liability coverage and/or multiple sources of uninsured motorist coverage.

Uninsured/Underinsured Motorist Coverage-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 that did not make contact 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 ten million dollars in coverage. If the UIM coverage is only $50,000 you may have trouble explaining your failure to pursue this.

Settlement

Settlement of uninsured motorist claims used to be very difficult.  There used to be a requirement that the uninsured motorist carrier had to consent.  That consent requirement has now been deleted.  A plaintiff can now settle with the liability insurer directly without the consent of the uninsured motorist 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 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.

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.

After Settling With Liability Carrier

Likewise the underinsured motorist carrier has no right of subrogation against the underinsured motorist.  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 I think it may be a good practice to do so.  The alternative is to get some confirmation from the UIM lawyer that there is no need to serve the released defendant.  As to the released defendant, if that person has counsel, then keep that person on your Certificate of Service and send them all pertinent pleadings.  The underinsured motorist carrier is going to pick up any responsibility for that defendant.  

Uninsured/Underinsured motorist Coverage-Stacking

It used to be that stacking within a policy was allowed.  That is, if there are several vehicles on the policy, then the uninsured motorist coverage could be stacked one vehicle on top of the other.  Now that is disallowed in most policies.  What is allowed however is inter-policy stacking.  

To determine exactly how that works, you need to first calculate the total coverage from each policy that provides the plaintiff uninsured motorist coverage.  You then deduct from that the total coverage on each liability policy that covers each defendant.  However a passenger in a single auto accident cannot stack the uninsured motorist coverage from the driver’s policy.  Trisvan v. Agway Ins. Co., 254 Va. 416 (1997)

If you have two parties that are at fault for the crash, then you do that per party.  Assume the total available uninsured motorist coverage is $250,000.  The total liability coverage for a single defendant is $100,000.  The available coverage then is $150,000.  

Credit Example

These calculations can also get into the application of what is called “the credit”.  Using an example from Gerry Schwartz’s article, assume that the plaintiff has a $100,000 judgment.  The defendant’s liability coverage is $50,000.  Plaintiff has $50,000 uninsured motorist coverage on his vehicle and is also insured under his mother’s vehicle for an additional $50,000 uninsured motorist coverage.  The plaintiff has a total of $100,000 in underinsured coverage.  The 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 underinsured motorist cases.  

Consent to Settle

There can arise a question where there are multiple underinsured motorist 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 policy 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.  

Better Practice

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.  If that’s not forthcoming:

  • Make sure that your release with the liability carrier requires that the defendant 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.

If the policy is one issued outside of the state of Virginia, then it may be that any right to settle is governed by the law of that state where the policy was issued.

Uninsured/Underinsured Motorist Coverage-What State Law Controls

In uninsured motorist cases there can arise a question of what state law is controlling.  Typically the rule is that if the question applies solely to the content of the policy i.e., is purely a contractual question, then it is probably going to be the law of the state where the policy was issued.  If however it’s a tort issue that exists, then Virginia is going to apply Virginia tort law if in fact that’s where the injury occurred.

For instance the plaintiff has a 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.  

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.  

Self-Insured Entity

To the extent that a defendant 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, 840 S.E.2d 334 (2020).

Defendant Has Coverage Less than the Statutory Minimum

The current statutory minimum of liability coverage in Virginia is $25,000.  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 however you have coverage that is purchased in Virginia, then it must be at least $25,000.  If you don’t have that much 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 coverage you have is $35,000.  See Virginia Code Section 46.2-472 and 38.2-2206.B and Reliance Ins. Co. v. Darden, 217 Va. 694 (1977)

UM Claim-Scenario One

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 the plaintiff’s household.  They each have $50,000 in coverage (household coverage).  The question is, what is the maximum amount of coverage available to the 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 such there is no UIM benefit under the host vehicle policy for the host’s liability.

As to Vehicle #2, this vehicle is underinsured by $125,000.00 because there is $150,000.00 in available UM coverage and only $25,000.00 in liability coverage.  The host vehicle does get a credit for the $25,000.00 in liability coverage.  Therefore the host vehicle will pay $25,000.00 in UIM benefits.  Vehicles #2 and #3 will pay their policy limits each of $50,000.00.

As to Vehicle #3, this vehicle is underinsured by $50,000.00.  Vehicles #2 and #3 have paid their full policy limits and therefore they are not further exposed.  The host vehicle has only paid $25,000.00 of its UM coverage.  If the host vehicle is entitled to a credit then the plaintiff will recover the $175,000.00 in liability coverage plus $125,000.00 in UIM benefits.

Contact

Call, or contact us for a free consult. Also for more info on this issue see the Wikipedia pages.

Also see auto liability coverage

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