KPM Law Blog

House Bill 93 was enacted by the Virginia General Assembly, signed by Governor McDonnell, and becomes the law on July 1, 2010.  It adds a new provision, Section “L”, to Va. Code Ann. §38.2-2206, and shifts the costs of defending an insured.  The relevant part of the statute reads as follows:

L. If the liability insurer or insurers providing coverage to an underinsured motor vehicle owner or operator make an irrevocable offer in writing to pay the total amount of liability coverage available for payment with reference to a claim for property damage or bodily injury, 60 days following written notice of the offer to any insurer or insurers providing underinsured coverage that have been served pursuant to this section, the insurer or insurers providing liability coverage shall be relieved of the cost of defending the owner or operator incurred thereafter, including expenses as well as reasonable and necessary attorney fees, and the insurer or insurers providing the underinsured motorist coverage shall reimburse the liability insurer or insurers for the costs to defend the underinsured motor vehicle owner or operator to the date of the underinsured motorist insurer's offer of its limit of coverage. The liability insurer or insurers shall nonetheless retain the duty to defend their insured. If underinsured motorist coverage is provided by more than one insurer, the cost to defend shall be assumed in the same order of priority as set forth in subsection B with regard to the payment of underinsured benefits upon the offer of each underinsured motorist insurer's limit of coverage. This subsection shall not apply in the event of either a jury verdict being returned in an amount equal to or less than the total liability coverage available for payment or a dispositive ruling dismissing the plaintiff's complaint. This subsection shall not apply to costs incurred in connection with an appeal.

Under the current law, a case with value that exceeds the available liability limits can still be forced to trial and a resultant judgment by a UIM carrier that either does not participate in the litigation, or does not make an offer acceptable to the plaintiff.   

Under the new version of the Uninsured Motorist Statute, a UIM carrier that does not settle a case must “reimburse” a liability carrier for defense costs and expenses incurred 60 days after the liability carrier offers its limits to the plaintiff.  The bill uses the term “reimburse”, and the duty to defend remains with the liability carrier.

These are key components for attorneys defending liability cases.  Through use of the word “reimburse”, and retention of the duty to defend by the liability carrier, defense counsel retained by the liability carrier will likely continue with their customary case handling practices.  Defense counsel will submit its legal bills and costs to the liability carrier that retained him or her, and provide the liability carrier with whatever reporting requirements it desires.  The liability carrier should continue to pay defense counsel and then submit legal bills and expenses to the UIM carrier for “reimbursement.”  This framework should prevent defense counsel from having to accept different rate structures and reporting requirements imposed by the UIM carrier.