Virginia Lawyers Weekly

The insurance carrier for a truck-leasing company cannot use contingency language in its policy to escape its obligation to provide underinsured motorist coverage on its own truck, a Richmond federal magistrate judge has ruled.

The carrier sought to push the UIM obligation to the company that leased the vehicle.

The Supreme Court of Virginia has allowed contingency clauses in liability coverage. U.S. Magistrate Judge Dennis W. Dohnal found that UIM coverage was different. As a result, an injured truck driver gets an additional $100,000 in available UIM coverage in his personal-injury lawsuit.

The decision in Jefferson v. Harco National Insur. Co. (VLW 009-3-349) caps a string a cases expanding UIM coverage. The ruling shows an insurer “cannot contract away its duty to provide UIM coverage,” said plaintiff’s attorney Elliot M. Buckner.

The plaintiff truck driver, Percell Jefferson Jr., was seriously injured in a Hanover County wreck in April 2007. He was hospitalized for several weeks with orthopedic and brain injuries, according to Buckner. His past and future medical bills are around $500,000, said co-counsel John J. Rasmussen.

The insurance company for the other driver offered its full liability limits of $100,000, but Jefferson clearly hopes for a larger recovery. His personal injury lawsuit demands $5 million.

At the time of the accident, Jefferson was driving a truck leased by his employer, Professional Delivery Systems. As required by the lease agreement, PDS had insurance that provided $100,000 in UIM coverage. At issue was a policy issued by Harco to the truck leasing company. That policy provided a UIM endorsement with language stating, “The insurance provided by this endorsement does not apply if, at the time of the accident, the insurance or indemnity required by the ‘lease or rental agreement’ is collectible.”

Dohnal noted Virginia law honors contingencies for liability coverage, but drew a distinction between liability and UM coverage.

Citing the recent Virginia Supreme Court cases of Seals v. Erie Ins. Exchange (VLW 009-6-051) and Virginia Farm Bur. Mut. Ins. Co. v. Williams (VLW 009-6-074), Dohnal found the UIM statute is to be applied liberally to afford coverage.

“[I]t does not appear that contingency provisions can be applied to UM coverage when such a limitation would effectively allow insurers such as Harco to evade any and all liability under [the Virginia UM statute] so long as other coverage exists,” Dohnal wrote. “Unlike valid contingent liability provisions, a contingent UM provision that precludes UM coverage for the policy owner denies the uninhibited coverage that the statute requires,” the judge said.

“That’s a big deal,” said Rasmussen, an insurance law specialist who represented Jefferson. “This, I think, is the first federal case to reach that holding that you can’t have contingent UIM coverage,” he said.

Rasmussen added that Jefferson is the third in a string of recent opinions that expand UIM coverage, including Seals and Williams.
“I see it as part of a trend in both state and federal courts in Virginia where the court is going through the policy in detail to test whether it’s ambiguous,” Rasmussen said.

While Dohnal’s opinion provides an extra $100,000 in available coverage for Jefferson, the ruling denied the plaintiff’s bid for the full $1 million. Jefferson argued that the policyholder did not properly waive its entitlement to UIM coverage in the full policy amount. Dohnal rejected those claims, holding the leasing company’s decision to limit UIM coverage to $100,000 was valid.

Rasmussen explained that Jefferson now appears to have $400,000 in total available coverage, based on liability coverage of $100,000, the two $100,000 UIM policies at issue in the declaratory judgment action, and an additional $200,000 in UIM coverage from a separate policy.

Close this Window Bookmark and Share This Page

Save to Browser Favorites / Bookmarks

Print RSS Feed Ask backflip blinklist BlogBookmark Bloglines BlogMarks Blogsvine BuddyMarks BUMPzee! CiteULike co.mments

Connotea del.icio.us Digg diigo DotNetKicks DropJack dzone Facebook Fark Faves Feed Me Links Friendsite folkd.com

Furl Google Hugg Jeqq Kaboodle kirtsy linkaGoGo LinksMarker Ma.gnolia Mister Wong Mixx MySpace MyWeb

Netvouz Newsvine oneview OnlyWire PlugIM Propeller Reddit Rojo Segnalo Shoutwire Simpy Slashdot Sphere

Sphinn Spurl Squidoo StumbleUpon Technorati ThisNext Twitter Webride Windows Live Yahoo!

Email This to a Friend

Copy HTML: 

 If you like this then please subscribe to the RSS Feed.

More »