Peter Vieth//November 8, 2010
Peter Vieth//November 8, 2010//
Insurance lawyers say the General Assembly may want to revisit its 2010 legislation designed to speed up settlement of claims involving underinsured motorist coverage in Virginia. Critics say there are many unanswered questions, and at least one lawyer said the bill tends to poison relationships among defense counsel.
The new state code provision aimed at streamlining UIM auto liability settlements has failed to shake up the world of personal injury claims in its first four months, by most reports. Observers report no pertinent court decisions, verdicts or settlements reflecting use of the new provision of Virginia’s UIM law.
Nevertheless, insurance companies and their lawyers have taken a close look at the new language, and they point out some unresolved issues suggesting further legislative attention.
The UIM reform bill advocated by the Virginia Trial Lawyers Association and passed by the 2010 General Assembly is intended to shift the cost of defense to a UIM insurance company that failed to settle a claim after the underlying liability carrier had offered its limits.
Personal injury attorneys had long complained that settlements of claims involving UIM coverage were delayed because the UIM carrier had no incentive to make a prompt offer.
A new subsection to Virginia Code § 38.2-2206 puts the cost of defense on the UIM carrier 60 days after a liability carrier provides written notice of an “irrevocable” offer of its limits.
The new provision has been analyzed in an article in the Roanoke Bar Review and in a seminar presentation before the Virginia Association of Defense Attorneys.
There are a number of unanswered questions arising from the new UIM settlement provision.
For example, how should the shift of defense costs be accomplished? The law states the liability carrier “shall be relieved of the cost” and the UIM carrier “shall reimburse the liability insurer.” The duty to defend stays with the liability carrier, but lawyers wonder, can a UIM carrier with major exposure use its own lawyers?
What is an “irrevocable offer”? If the liability carrier conditions its offer on a waiver of subrogation rights by the UIM carrier, does that make the offer “revocable”?
What about subrogation rights? An insurer that makes a UIM payment to its insured normally has a right to seek reimbursement from the person who caused the damages. The wrongdoer’s liability carrier normally has a duty to protect its insured from such a claim if possible. The statute is silent on subrogation.
If there are multiple UIM carriers, which one has to pay defense costs? Does the first one in line have to pay even if it offered its limits?
Uncertainty about the defense role led to conflict between insurance companies in several recent cases, according to one lawyer involved. The lawyer asked not to be identified because she is not authorized to speak for her insurance company employer.
She said in one case, the insurance companies agreed to have their lawyers try the case jointly, but there were quarrels and criticisms about the use of an expert and other defense tactics. “It’s pitting the two defense attorneys against each other. It’s really bad,” the lawyer said. In some cases, she said, UIM insurance carriers have refused to waive subrogation unless the liability carrier hired a particular expert. “I don’t think it’s working well at all,” she said.
Richmond lawyer Matthew D. Green, who spoke to VADA members last month, said the language adopted by the General Assembly is much simpler than equivalent provisions adopted by other states. “It may prove necessary for the General Assembly to revisit subsection (L) if it does not work as intended,” he wrote in an outline.
UIM ‘stacking’ issues persist
Meanwhile, the issue of UIM stacking continues to produce litigation. A decision last month from Richmond U.S. District Judge James R. Spencer denied stacking of UIM coverage for a woman who allegedly incurred nearly $200,000 in medical bills from a 2009 auto accident in Sussex County.
The opinion is Hostettler v. Auto-Owners Ins. Co., VLW 010-3-534. It granted summary judgment for the UIM insurer in a declaratory judgment action.
Franki Lynn Hostettler was a passenger in a car driven by Pavel Goska, who allegedly caused the accident. Goska had liability coverage of $100,000. Hostettler claims she was a resident of her grandparents’ home, where they had an auto policy providing UIM coverage for four vehicles with a $100,000 limit for each.
The anti-stacking language in the grandparents’ policy stated the “limits of Bodily Injury Liability shown in the Declarations for each person … is [the] maximum limit of liability for all damages.” The policy also said, “This is the most [the UIM carrier] will pay regardless of the number of … [v]ehicles or premiums shown in the Declarations.”
The declarations pages listed the $100,000 limit for each vehicle.
Spencer found the UIM policy “clearly and consistently” laid out the “each person” UM/UIM limit of $100,000 for each of the four vehicles using language found to be “unambiguous” in a seminal Virginia Supreme Court opinion.
“We look forward to litigating this issue on appeal,” said Richmond lawyer John J. Rasmussen, who represented the injured plaintiff.
“The real prognosis for stacking hinges entirely on what happens next in the Virginia Supreme Court on this issue,” Rasmussen said.
Stanley P. Wellman of Richmond, who represented the UIM carrier, said, “The law is clear. As long as the UIM coverage amounts listed on the policy declarations page are the same, that listed amount is the maximum amount of UIM coverage available to the insured regardless of the number of vehicles insured or premiums charged.”
Wellman said at least eight recent federal and state trial court decisions addressing the stacking issue have refused to permit UIM stacking.
In another corner of the UIM arena, a Fairfax judge may have provided some comfort for plaintiffs’ lawyers who jump the gun on paperwork when a liability carrier offers its limits. It happened to a Northern Virginia attorney, said Alexandria lawyer Thomas J. Curcio.
The lawyer received a $25,000 limits offer from a driver’s auto liability carrier. The written offer included a condition for waiver of UIM subrogation and a release to be signed by the claimant.
The inexperienced lawyer had the client sign the release of “any and all claims” and sent it back to the liability carrier without waiting to resolve the client’s UIM claim, according to Curcio.
When the UIM carrier learned of the general release, it filed a plea in bar to avoid coverage. Curcio said he represented the claimant at that point and argued against the plea in bar. Fairfax County Circuit Judge Marcus D. Williams ruled the release would not bar the UIM claim, Curcio said.
The judge found the offer was subject to a “condition precedent” – the demand for a waiver of UIM subrogation – so the release was not effective when signed by the claimant, according to Curcio.