Virginia's new legislation will significantly change the exposure of insurers under the UIM coverage provisions of the auto policies they issue. Uninsured motorist coverage and underinsured motorist coverage, commonly known as UIM, are insurance coverages that apply when the at-fault driver, called the plaintiff, has no insurance coverage or has insurance coverage lower than the damage suffered by the victim. Once a settlement has been reached with the at-fault driver (through their auto insurance provider), Virginia law, specifically Code § 38,2-2206 (K), allows for a special type of settlement that exempts the at-fault driver from liability without prejudice to any UIM benefits or claims. Car insurance buyers in Virginia will be able to opt out of this rule, similar to the process that allows the insured to reduce their UIM b coverage limit to the minimum required by law.
The notification to the insurer issuing the policy will be made as prescribed by law, as if the insurer were one of the parties being sued. If the old law is still in effect, the injured person cannot settle their car accident case with the other driver's liability insurance company, Geico in this example, without the consent of the underinsured motorist insurance company (UIM). THE LAW HAS BEEN AMENDED TO REQUIRE INSURERS THAT OFFER COVERAGE FOR UNDERINSURED MOTORISTS TO PAY FOR ANY DAMAGE DUE TO AN INSURED, IN ADDITION TO ANY LIABILITY FOR BODILY INJURY OR PROPERTY DAMAGE THAT APPLIES TO THE INSURED'S DAMAGES. For example, if a husband and wife share an auto insurance policy and the husband notifies his auto insurance provider that he is refusing UIM coverage beyond the minimum limit required by law, this denial will apply to any UIM coverage available to the wife if she is injured as a result of a car accident.
And as with that process, if a designated insured decides, in writing, to reduce any UIM payments within the applicable liability coverage limits, it is binding on all other insured persons covered by the UIM policy. If an insured initiates any action against the owner or operator of an uninsured or underinsured motor vehicle with the intention of relying on the provision of uninsured or underinsured coverage or on the approval of this policy under which the insured files a claim, the insured will deliver a copy of the process to this insurer in the manner prescribed by law, as if the insurer were one of the parties being sued.