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Changes aimed at streamlining UIM settlements

Peter Vieth//May 15, 2015

Changes aimed at streamlining UIM settlements

Peter Vieth//May 15, 2015

Virginia CapitolA new state statute and revisions to an old one have personal injury lawyers hoping some difficult settlements might become easier.

One provision of the new law was seen as a “sea change of immense proportions” by one attorney who handles insurance coverage matters.

The changes – approved by the 2015 General Assembly and signed into law last month by Gov. Terry McAuliffe – affect the procedure for negotiating for underinsured motorist benefits from an injured person’s insurance company.

Underinsured motorist (UIM) coverage kicks in when a negligent driver does not have enough insurance to cover damages caused in an accident. The injured victim can look to the victim’s own insurance policy to close the gap.

Lawyers for injured persons complained that, under Virginia law, the insurance company with UIM coverage had little incentive to negotiate after the tortfeasor’s insurance company agreed to pay its limits.

Reforms in 2010 were designed to shift the costs of litigation when a UIM carrier balked at settlement, but those changes failed to help, lawyers said.

The bills that passed this year apply only to policies issued or renewed on or after Jan. 1, 2016.

The measures are House Bill 1819 and Senate Bill 1190.

Under the new law, after a liability carrier pays its limits in a case with UIM exposure, that carrier owes “no further duties” to defend its insured, shifting those duties to the UIM insurance company.

The changes to the UIM law include prescribed language for a release of the accused driver based on payment of the liability limits.

Moreover, the UIM carrier loses the right of subrogation against the driver at fault, meaning the UIM company cannot seek to recover its payments from the driver.

The loss of subrogation rights applies only if the defendant driver cooperates with the UIM carrier in the defense of the case.

A new statute, Virginia Code § 8.01-66.1:1, establishes criteria for a presumption of failure to reasonably cooperate.

The driver would be presumed uncooperative if he or she

  • Failed to show up for deposition or trial,
  • Failed to assist in written discovery,
  • Failed to meet with defense counsel, or
  • Failed to notify UIM counsel of any change in address.

The shift in responsibility for defense is a “sea change of immense proportions,” according to John D. Eure of Roanoke, who authored an analysis of the earlier UIM reform effort.

The UIM carrier now has to step up when a liability carrier tenders its limits, Eure said.

“This puts all the pressure on them,” Eure said.

“We’re hopeful it’s going to make a significant change, in a relatively small number of cases,” said Richmond lawyer Elliot M. Buckner, who represented the Virginia Trial Lawyers Association in efforts to tweak the UIM settlement process.

Mediation failed

The reform measure grew out of an unsuccessful mediation effort, Buckner said.

A 2014 reform bill was rejected, with lawmakers telling stakeholders to try to find common ground.

The trial lawyers hired Mark E. Rubin, executive director of the Virginia Center for Consensus Building at Virginia Commonwealth University. With Rubin as mediator, the trial lawyers and insurance companies held a series of meetings, but no agreement was ever reached.

Nevertheless, Del. Terry Kilgore, R-Gate City, introduced a renewed reform effort in the 2015 Assembly.

Legislators generally were on board, but the insurance companies were opposed, with one exception.

Anne Leigh Kerr, a lobbyist for insurer United Services Automobile Association, said she saw that a bill would pass in some form and sought to avoid collateral damage.

“I advised my client to work with the legislators and come up with the best bill we could come up with,” she said.

She told members of the House Civil Laws subcommittee she would support the changes on UIM procedures if another bill, enabling bad faith claims based on UIM coverage, was killed.

“When you know something is going to pass, sometimes the best thing you can do is work to try to make it something you can live with,” Kerr said.

Subcommittee crafted final version

The chair of the House subcommittee, Del. Gregory D. Habeeb, R-Salem, said legislators hammered out the language that emerged.

One potential problem involved advising the accused driver about his or her rights when a limited release is being given for a settlement for liability coverage.

Habeeb said the lawmakers sought to make the release understandable, even to an unsophisticated defendant.

“We spent a lot of time working on the language in that release,” Habeeb said.

The legislation is not intended to be an anti-insurance industry measure, Habeeb said. He noted there are always insurance companies on both sides when UIM coverage is implicated.

“It is not intended to be a ‘plaintiffs winning over the insurance company’ bill,” Habeeb said, adding, “We’ll see how it plays out.”

Eure said the new statute’s presumptive definition of “failure to cooperate” is much narrower than the case law addressing the issue. Court opinions focused on the accused driver’s honesty, he said.

One case spoke of a defendant’s obligation to “fairly, fully and accurately” disclose the facts of an accident.

Other cases focused on alleged collusion between those involved in the accident to obscure the facts.

The statute does not mention those aspects of cooperation.

“What incentives do they have to be fully truthful and forthcoming? I would say, ‘very little,’” Eure said.

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