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Shapiro, Lewis, Appleton & Favaloro
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New Virginia Law On Under-Insured Motorist Coverage Is Needed

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There is some chance that the Virginia General Assembly will finally pass this year an important improvement in the way that certain automobile insurance situations are handled. House Bill 93 (HB93), Cost Shifting to UM (Uninsured Motorist) Carrier, has passed the House of Delegates, 97-0. Even an ex-insurance defense lawyer on the committee looking at the bill supported it. The Senate may be a tougher sell.

The basic idea of the bill is to solve the problem where the at-fault driver’s own liability carrier has offered its full policy limits and yet a settlement does not occur because the injured person’s own insurance company refuses to make a reasonable settlement offer under the part of the customer’s auto policy called the underinsured motorist coverage. The obligation to pay for UIM does not kick in until a jury verdict, so the insurance company stalls until it is facing a judgment, even in a slam dunk case with a severe injury. Underinsured motorist coverage is intended to give a person the benefit of their having paid for higher policy limits if they are hurt in a car wreck by someone who is carrying lower limits. You first get the limits of the liability insurer if the case is worth that much, and then you can seek the difference in policy limits between the injured person’s and the other policy, again to the extent that the injury merits that level of damages. The difficulty arises often when there is a clear case with large damages. The at-fault carrier offers their policy and ironically the client’s own insurer refuses to settle with them for what that insurer owes. Why? The answer is that the UM insurance company is given no incentive the way the law is set up right now, not to force the case all the way to trial. They currently do not have to pay any amount of costs, meaning attorney’s fees or expenses, associated with trying the case. Those fall on the liability carrier who did the right thing and offer their limits. This does not make any sense. The problem has existed for years and needs fixing.

The new law attempts to correct this by simply shifting the cost from a liability carrier who has already offered all of their money to the UM carrier who is holding up a settlement because they don’t have any reason to get it done. This law does not change anything other than who is responsible to pay the attorney’s fees and costs on the defense side, to the company whose delay really is preventing the case getting settled.

The main difference this year is that the proponents of the bill have greatly simplified how it is written. This is a somewhat complicated area that is certainly more easily understood by injury trial lawyers, like myself, who specialize in automobile accidents and deal with insurance companies all the time. In fact this situation of a client having to go to trial and having to wait around because their own insurance refuses to settle their case properly is something we see in our office at least several times a year.

I hope this bill will get passed as it will improve the way automobile accidents are handled in Virginia. It is really a good government law which will reduce the number of accident cases that have to go to trial, and improve courts’ efficiency. The new law makes sense and is more fair than the old way we have been doing it.