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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 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 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-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 from the owner or operator of an uninsured motor vehicle” with limits not less than the statutory minimum.  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 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.

Specific Rules

1. Determine The Liability Coverage

See the blog post on this site entitled Auto Liability Insurance Coverage to get a full grasp of where liability coverage may be found. 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.

2. The State Law Where the UM Policy was Issued Controls The Rest Of The Analysis

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 that controls.  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.

3. UM Coverage Where Va. Law Controls

Where D is uninsured, the analysis is fairly simple.  Your UM coverage applies.  Lack of liability insurance however can rear its head in different ways:

A. 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)

B. 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.

C. 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 uninsured motorist carrier pays up to its limits.  The uninsured motorist 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.

4. UIM Coverage Where Va Law Controls

UIM coverage is much more complex than is UM coverage.  It applies where there is liability coverage but not enough.  To determine UIM coverage there are several things to look at:

A. The Vehicle Must Be Used As A Vehicle

If the vehicle is being used for a drive by shooting there may not be UM coverage

B. The Named Insured Gets Preferred Treatment

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.  They may be in a public bus and they would be covered.  They 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.

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.  However if the driver does something to void coverage for himself, this does not mean that the coverage is voided for the passenger.
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. Look at the occupied vehicle

Normally the coverage on that vehicle is going to be primary.  The two exceptions to that are self-insured vehicles and garage vehicles.

   i. Self-Insured Entity

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, 840 S.E.2d 334 (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 section 38.2-2206.B. (3) Likewise the self-insured entity becomes secondary in terms of exposure under Virginia Code section 46.2-368 for purposes of payment. Catron v. State Farm, 255 Va. 31 (1998).

   ii.  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.

D.  Look at the plaintiff

Imagine that the UIM coverage is actually stuck to the plaintiff’s body as a named insured.

E.  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.

F. Is There Double 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 UM. Assume those same facts but now there is no UM but rather an at fault motorist with $25,000 coverage. Friend#2 can recover $50,000 in liability and $25,000 in UIM. 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)

G. 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 $50,0000 total UIM where there is only $25,000 liability.

H. Determine Priority

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 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.

I.  Apply the Credits

The credit is the total amount of liability coverage insuring the defendant subtracted from the total UM coverage available to the plaintiff. It is that difference that is paid to the plaintiff.
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 statutory credit can become much more complicated when you have multiple sources of liability coverage and/or multiple sources of uninsured motorist coverage.
The credit is only applied in UIM cases.

Credit Example

These calculations can also get into the application of “the credit”.  Using an example from Gerry Schwartz’s article, assume that P has a $100,000 judgment.  D’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.  P has a total of $100,000 in UM coverage.  P 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.

J.  UM Limits

In cases where the UM limits are split limits, the split limits may 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 probably $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.

K.  Do the Calculation

The calculation of actual coverage is determined by first calculating all of the UM 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 per defendant from the total UM coverage and that tells you the amount of UIM coverage.  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.

Imagine P has $100,000 in UM. D1 and D2 each have $50,000 liability. P therefore has UIM of $100,000 and could recover $200,000 i.e.$100,000 liability and $100,000 in UIM.

Examples

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.
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.
Another Example:
P 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 P 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 P’s household.  They each have $50,000 in coverage (household coverage).  The question is, what is the maximum amount of coverage available to P?

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.

Settlement

1.  UM Cases

In settling UM cases, the process is fairly simple.  There may however be different layers of UM coverage, so you may have to deal with issues of getting consent of the different layers of coverage.

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.  That consent requirement has now been deleted.  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 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.

B.  Settling With Liability Carrier
There is no obligation in the statute or the personal auto policy to notify the UIM carrier of your settlement with the liability carrier.  Your obligations are:  (1) to sign an effective Virginia Code section 38.2-2206(k) Release; (2) serve the UIM carrier; (3) obtain an enforceable judgment.  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.

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.

C.   Consent to Settle

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 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 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.

D.  Additional Things to do After Settling

If 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, defining 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”.

The UIM carriers do not have to participate.  There is probably nothing you can do to make them participate.  If they do not participate and you want to force their hand, you may file a motion to preclude them from defending but that motion is probably not going to be granted as they have no obligation to defend.  If they don’t defend, then simply set the matter for trial and proceed to trial.

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 involves 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.

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.

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 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 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-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 from the owner or operator of an uninsured motor vehicle” with limits not less than the statutory minimum.  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 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.

Specific Rules

1. Determine The Liability Coverage

See the blog post on this site entitled Auto Liability Insurance Coverage to get a full grasp of where liability coverage may be found. 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.

2. The State Law Where the UM Policy was Issued Controls The Rest Of The Analysis

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 that controls.  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.

3. UM Coverage Where Va. Law Controls

Where D is uninsured, the analysis is fairly simple.  Your UM coverage applies.  Lack of liability insurance however can rear its head in different ways:

A. 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)

B. 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.

C. 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 uninsured motorist carrier pays up to its limits.  The uninsured motorist 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.

4. UIM Coverage Where Va Law Controls

UIM coverage is much more complex than is UM coverage.  It applies where there is liability coverage but not enough.  To determine UIM coverage there are several things to look at:

A. The Vehicle Must Be Used As A Vehicle

If the vehicle is being used for a drive by shooting there may not be UM coverage

B. The Named Insured Gets Preferred Treatment

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.  They may be in a public bus and they would be covered.  They 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.

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.  However if the driver does something to void coverage for himself, this does not mean that the coverage is voided for the passenger.
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. Look at the occupied vehicle

Normally the coverage on that vehicle is going to be primary.  The two exceptions to that are self-insured vehicles and garage vehicles.

   i. Self-Insured Entity

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, 840 S.E.2d 334 (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 section 38.2-2206.B. (3) Likewise the self-insured entity becomes secondary in terms of exposure under Virginia Code section 46.2-368 for purposes of payment. Catron v. State Farm, 255 Va. 31 (1998).

   ii.  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.

D.  Look at the plaintiff

Imagine that the UIM coverage is actually stuck to the plaintiff’s body as a named insured.

E.  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.

F. Is There Double 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 UM. Assume those same facts but now there is no UM but rather an at fault motorist with $25,000 coverage. Friend#2 can recover $50,000 in liability and $25,000 in UIM. 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)

G. 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 $50,0000 total UIM where there is only $25,000 liability.

H. Determine Priority

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 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.

I.  Apply the Credits

The credit is the total amount of liability coverage insuring the defendant subtracted from the total UM coverage available to the plaintiff. It is that difference that is paid to the plaintiff.
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 statutory credit can become much more complicated when you have multiple sources of liability coverage and/or multiple sources of uninsured motorist coverage.
The credit is only applied in UIM cases.

Credit Example

These calculations can also get into the application of “the credit”.  Using an example from Gerry Schwartz’s article, assume that P has a $100,000 judgment.  D’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.  P has a total of $100,000 in UM coverage.  P 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.

J.  UM Limits

In cases where the UM limits are split limits, the split limits may 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 probably $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.

K.  Do the Calculation

The calculation of actual coverage is determined by first calculating all of the UM 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 per defendant from the total UM coverage and that tells you the amount of UIM coverage.  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.

Imagine P has $100,000 in UM. D1 and D2 each have $50,000 liability. P therefore has UIM of $100,000 and could recover $200,000 i.e.$100,000 liability and $100,000 in UIM.

Examples

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.
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.
Another Example:
P 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 P 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 P’s household.  They each have $50,000 in coverage (household coverage).  The question is, what is the maximum amount of coverage available to P?

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.

Settlement

1.  UM Cases

In settling UM cases, the process is fairly simple.  There may however be different layers of UM coverage, so you may have to deal with issues of getting consent of the different layers of coverage.

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.  That consent requirement has now been deleted.  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 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.

B.  Settling With Liability Carrier
There is no obligation in the statute or the personal auto policy to notify the UIM carrier of your settlement with the liability carrier.  Your obligations are:  (1) to sign an effective Virginia Code section 38.2-2206(k) Release; (2) serve the UIM carrier; (3) obtain an enforceable judgment.  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.

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.

C.   Consent to Settle

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 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 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.

D.  Additional Things to do After Settling

If 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, defining 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”.

The UIM carriers do not have to participate.  There is probably nothing you can do to make them participate.  If they do not participate and you want to force their hand, you may file a motion to preclude them from defending but that motion is probably not going to be granted as they have no obligation to defend.  If they don’t defend, then simply set the matter for trial and proceed to trial.

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 involves 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.

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.

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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