A new piece of legislation will create big changes in the landscape of Virginia Liability Auto Insurance Coverage, and will significantly impact the defense of our clients in claims arising from motor vehicle accidents, particularly in the context of UM/UIM claims. Virginia Senate Bill 754 introduced by Sen. Mark Obenshain removes Virginia’s longstanding credit/offset for available liability coverage that reduces or eliminates the benefit of underinsured coverage.
Historically, a claimant’s insurance company would benefit from an offset for the negligent driver’s liability coverage. For example, if Claimant A made a claim against Tortfeasor B for injuries resulting from negligent operation of a motor vehicle, and Tortfeasor B had a $25,000 liability policy while claimant A had a $50,000 UIM policy, then the underinsured
carrier would only face exposure of $25,000 as opposed to the full $50,000 because it would get a credit for the $25,000 paid by the liability carrier.
The bill allows purchasers of insurance to avoid extra premium if they instead choose tocontinue allowing application of the offset provision. Insurance companies lobbied against the bill unsuccessfully, and the Virginia Senate passed the bill on February 4, 2022. The bill was
subsequently passed by the Virginia House of Delegates on March 9, 2022 and signed into law by Governor Youngkin on April 11, 2022. The new law goes into effect on July 1, 2023 and will only impact policies that go into effect beyond that date.
As a result of this measure being signed into law, there will be an amendment to Va. Code §38.2-2202. The statute requires that all policies issued after July 1, 2023 include the following notice:
“C. No policy of insurance covering liability arising out of the ownership, maintenance, or use of
any motor vehicle shall be issued, delivered, or renewed after July 1, 2023, in the Commonwealth
unless the following statement, printed in boldface type, is enclosed with the policy:
IMPORTANT NOTICE
PREVIOUSLY, YOUR UNDERINSURED MOTORIST COVERAGE PAID DAMAGES DUE
TO AN INSURED AFTER ANY CREDIT OF THE BODILY INJURY OR PROPERTY
DAMAGE LIABILITY COVERAGE APPLICABLE TO THE INSURED’S DAMAGES HAD
BEEN APPLIED.
THE LAW HAS BEEN AMENDED TO REQUIRE INSURERS TO PROVIDE
UNDERINSURED MOTORIST COVERAGE THAT PAYS ANY DAMAGES DUE TO AN
INSURED IN ADDITION TO ANY BODILY INJURY OR PROPERTY DAMAGE LIABILITY
THAT IS APPLICABLE TO THE INSURED’S DAMAGES. THIS CHANGE MAY AFFECT
YOUR PREMIUM.
YOU MAY ELECT TO REFUSE THIS CHANGE IN YOUR UNDERINSURED MOTORIST
COVERAGE.
AN ELECTION TO DECREASE YOUR UNDERINSURED MOTORIST COVERAGE MUST
BE IN WRITING. ONCE ANY ONE NAMED INSURED ELECTS TO DECREASE THE
UNDERINSURED MOTORIST COVERAGE THAT ELECTION IS BINDING ON ALL
INSUREDS ON THE POLICY. LATER, IF YOU DESIRE TO PURCHASE INCREASED
UNDERINSURED MOTORIST COVERAGE, YOU MUST MAKE A SPECIFIC REQUEST TO
YOUR INSURER. YOU MUST PUT THIS REQUEST IN WRITING.
BEFORE ELECTING TO DECREASE YOUR UNDERINSURED MOTORIST COVERAGE,
YOU SHOULD CAREFULLY CONSIDER THAT THIS COVERAGE PROVIDES
IMPORTANT PROTECTION IN THE EVENT YOU ARE INJURED OR YOUR MOTOR
VEHICLE IS DAMAGED DUE TO THE ACTIONS OF AN UNDERINSURED MOTORIST.”
Additionally, there will be significant changes to §§38.2-2206 and 46.2-2057 to reflect these changes and enact the policy that insureds will be entitled to the full benefit of any underinsured coverage unless they decide to opt out. Some key language changes to the above
referenced code sections are as follows:
• “…underinsured motorist coverage shall be paid without any credit for the bodily injury and property damage coverage available for payment, unless any one named insured signs an election to reduce any underinsured motorist coverage payments by the bodily injury liability or property damage liability coverage available for payment by notifying
the insurer as provided in subsection C of § 38.2-2202. This election by any one named insured shall be binding upon all insureds under such policy.”
• “2. If an injured person is entitled to uninsured or underinsured motorist coverage under more than one policy, insurers shall be obligated to the injured person in the following order of priority of payment:
o a. The policy covering a motor vehicle occupied by the injured person at the time of the accident
o b. The policy covering a motor vehicle not involved in the accident under which
the injured person is a named insured;
o c. The policy covering a motor vehicle not involved in the accident under which the injured person is an insured other than a named insured.
o Where there is more than one insurer providing coverage under one of the payment priorities set forth, their liability shall be proportioned as to their respective available uninsured or underinsured motorist coverages.”
• 3. If an injured person is entitled to underinsured motorist coverage under one or more policies wherein a named insured has elected to reduce the underinsured motorist limits by the available bodily injury liability insurance or property damage liability insurance coverage available for payment, any amount available for payment shall be credited
against such policies in payment priority pursuant to subdivision 2 a only, and where there is more than one such policy entitled to such credit, the credit shall be apportioned pro-rata pursuant to the policies’ respective available underinsured motorist coverages.”
*The full text of the amended statutes with changes can be read here:
https://lis.virginia.gov/cgi-bin/legp604.exe?221+ful+CHAP0308
As a result of this legislation, the exposure to UM/UIM carriers will increase beginning on July 1, 2023. This legislation represents a continued shift by Virginia law makers to shift additional financial burden toward UM/UIM carriers. Beginning next July we will continue to provide timely and sound legal advice on this issue and how it will impact carriers defending claims. You can trust KPM to be knowledgeable in all areas of the law, and to continue to keep you updated on legislation that would significantly impact our clients. Please don’t hesitate to reach out to us with questions, concerns, or for assistance.