NEW VIRGINIA LEGISLATION ELIMINATES UIM CREDIT

New legislation in Virginia will significantly change insurers’ exposure under the UIM coverage provisions of the auto policies they issue. The amended statute, which becomes effective July 1, 2023, provides that insurers will no longer receive the benefit of any credit or offset for available liability coverage.

Prior to passage of this bill, a credit in the amount of any available liability coverage would be applied to reduce the insurer’s obligation to pay its UIM policy limits. For example, if an insured had $100,000 in UIM coverage, and there was $50,000 available for payment under the tortfeasor’s automobile liability coverage, the insured would only have a total of $50,000 available in UIM coverage. Once this new legislation goes into effect, under the same scenario, the insured will have the full $100,000 in UIM coverage available, thus increasing the insurer’s exposure.

The following language is being added to the Virginia Code section regarding uninsured motorist insurance coverage - §38.2206 A:

The endorsement shall provide that 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. 

Subsection C of §38.2-2202 has been amended to state as follows:

1.  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.

As noted above, this new law applies to policies issued, delivered, or renewed after July 1, 2023. To see the full text of the bill, go to: https://lis.virginia.gov/cgi-

bin/legp604.exe?221+ful+CHAP0308

Look out for our April Litigation Report for a full synopsis of all new legislation going into effect in July that may have an impact on the insurance industry.