What insurers need to know

On July 1, 2024, new Virginia Code § 8.01-66.1 went into effect and created a new bad faith cause of action that may be significant for underinsured or uninsured (UIM) carriers.

Code Va. former § 8.01-66.1 did not create an obligation for UIM carriers to settle a case before trial. Instead, it created a remedy only when UIM carriers bad faith refused to pay once the insured obtained judgment. Manu v. GEICO Cas. co.293 Va. 371, 391 (2017).

But under new Virginia Code § 8.01-66.1, the UIM carrier’s obligation is no longer triggered by a court order; instead, it is triggered “when liability to (the) insured has become reasonably foreseeable without the need for judgment on the part of its insured . . .”

Once this duty is triggered, a UIM carrier may now be liable if, in bad faith:

• refuses, declines, fails to pay or fails to make a timely and reasonable settlement offer or
• after all applicable liability policy limits and underlying UIM benefits have been offered or paid, rejects a reasonable request for settlement within the UIM policy coverage limits or fails to respond within a reasonable time after such request is made.

If a court determines that the conduct of a UIM carrier was not in good faith, then it will award not only the amount due and owing by the UIM carrier to its insured, but also an amount up to double the judgment obtained against the tortfeasor, not to exceed 500,000 USD, together with attorneys’ fees for filing the bad faith claim and all costs and expenses incurred by the insured to secure a judgment against the tortfeasor and interest.

The new Code of Virginia § 8.01-66.1 marks a significant change in the legal landscape for UIM carriers in Virginia. As a result of this new bad faith law, UIM carriers must be diligent and cautious in managing the early resolution of UIM claims to mitigate risk. And given the statute’s tight timelines for investigating liability and damages and responding to claims, UIM carriers should consider engaging legal counsel early to ensure a timely and appropriate response.

Reprinted with permission from DeCoster, an attorney with Sands Anderson.

TOPICS
Virginia carriers