There is no getting around it—car insurance is complicated. It really should not be, especially since the point of car insurance is to cover injury or losses sustained during a very stressful event. But an insurer’s job is NOT, despite flashy commercials claiming otherwise, to be on your side. It is to fulfill its obligation by paying out as little as legally possible when you file a claim.
Much of the time, insurance carriers will take advantage of the fact that most people do not understand all the terms and conditions involved in their contract. They will put in vague wording or ask for forms that are not required to trip you up, thereby allowing themselves to pay you less than you are entitled to without technically breaking any laws.
That is why bad faith laws exist…sometimes.
Bad faith, essentially, means that an insurance carrier is acting in “bad faith” when negotiating claims a certain way. A bad faith claim is based on the legal duty of contracting parties (an insurance policy is a contract) to act in “good faith” with each other, that is to deal fairly and honor the terms of the contract. Bad faith claims typically include: grossly undervaluing a case on its merits, not evaluating a case in a timely manner, and forcing a party to go to trial based on a low-ball offer. “Bad faith” is a very broad term, and that is why many states define exactly what “bad faith” entails. These laws are state-mandated, so they vary widely across the country and make proving bad faith challenging.
Bad faith negotiations occur very often when underinsured or uninsured motorists are involved in a car accident, simply because the requirements around those claims can be very complicated and a point of contention between the insured and insurer.
Virginia Has No Bad Faith Laws in Underinsured and Uninsured Motorist Coverage
Underinsured motorist (UIM) and uninsured motorist (UM) coverage is coverage that a person has on their car insurance policy that provides coverage against damages caused by underinsured or uninsured parties. This means that if you are injured in a car accident caused by someone that does not have insurance or has lower insurance limits than you, your own car insurance policy will cover the difference up to the limits of your policy.
For example, an underinsurance claim occurs if you have $100,000 in UIM/UM coverage and are involved in a crash with someone who only has $25,000 in coverage, your own insurance policy would cover the difference of $75,000. If the at-fault driver’s insurance offers their $25,000 policy, the next step would be to seek compensation under your own policy for that $75,000 that is available.
Using a similar example, an uninsured claim occurs if you have $100,000 in UIM/UM coverage and are involved in a crash with someone that is uninsured. In that situation, your own insurance policy would provide coverage to you up to your $100,000.
So, the issue in the two examples, from a bad faith perspective, is whether the claim has a value that reaches into the coverage provided by your own insurance limits. That is, in the underinsurance example, is the case worth more than the $25,000 available on the other party’s insurance policy. In the uninsured example, the question is even more clear as it is whether the claim has any value at all.
Unfortunately, in Virginia, bad faith cannot be brought against UIM/UM carriers. The Virginia Supreme Court held in Manu v. GEICO Cas. Co., 293 Va. 371 (2017) that by statute, a UIM/UM obligation to pay an uninsured or underinsured amount does not occur until “…an insured must be ‘legally entitled to recover’ the damages he is seeking…” See id at 379. This essentially means that an insurance carrier has no obligation to pay any UIM/UM amount until a verdict is rendered. Since Virginia has no bad faith laws currently dealing with UIM/UM negotiations, and there is no obligation to pay until a verdict is rendered, this provides an insurance carrier with an overwhelming advantage when negotiating cases.
A UIM/UM carrier does not have to offer anything to settle a valid claim and can force their own insured to go to court and spend a small fortune on trying a case; to just get an inevitable verdict.
The difference between an at-fault party’s insurance carrier and your UIM/UM carrier is that the at-fault party’s insurance carrier could be subject to a bad faith claim by its insured if it acted in bad faith in negotiating the claim and forced the case to trial. An example would be if you are badly injured by someone with $25,000 in coverage and the carrier refuses to pay its $25,000 limits to fully settle the case. If you then go to court and get a $50,000 verdict, the insured is personally liable for the $25,000 over the limits. As a liability carrier has a duty to protect its insured from personal liability, and it failed to do that by not agreeing to settle the case for the $25,000 limits, the insured has a bad faith claim against his/her insurance company. Facing a bad faith claim from their insured, a liability carrier will sometimes pay the excess verdict.
Conversely, if someone with no insurance injures you, but you have $25,000 in UM coverage, and your insurance carrier does not offer that $25,000, and you go to court and get a $50,000 verdict, your insurance carrier would only have to pay the $25,000.
The lack of Virginia’s bad faith laws for underinsured and uninsured motorist coverage gives the UIM/UM carrier the ability to do absolutely nothing, hold off paying fair compensation for as long as possible until you go to court, and spend more money doing so.
So, What Can You Do?
The best way to change this antiquated standard is to write your local State Senator and delegate to encourage their support for enacting bad faith laws for underinsured and uninsured policies in Virginia.
There is a bill to be presented to the Virginia General Assembly in 2021. Hence, the best way to make a difference now is to write your local representatives to support a bill for creating bad faith laws that apply to UIM/UM coverage. Please feel free to reach out to us as we can provide you with a copy of the bills we expect to see introduced, as well as giving you contact information for your State Delegate and State Senator to make your voices heard on this important issue, which will provide added protection for you and your family in the event of a car accident.
Also, if you have suffered an injury in an accident, the team at Curcio Law is well-versed in personal injury cases, dealing with UIM/UM carriers, and have the experience to get you what you deserve. Call or text us today at 703-836-3366, email email@example.com, or contact us at www.curiciolaw.com.
Justin Curcio joined Curcio Law in January 2020. Justin received his J.D. from St. John’s University School of Law in 2015. After passing the Virginia Bar in 2015, Justin was in-house counsel for an insurance defense firm (Allstate/Esurance/Encompass) for over four years before joining Curcio Law. During law school, he worked for the Nassau County District Attorney’s Office and the law firm of Bartlett, McDonough & Monaghan, LLP. Contact Justin at firstname.lastname@example.org.