Virginia Code section 38.2-2206 governs certain primary terms that auto insurance companies must provide when selling you “uninsured motorist” coverage. Amendments to that (effective July 1, 2023) may provide you substantially more overall coverage from your OWN policy in cases where a negligent driver injuries you. Whether the increase applies depends upon whether 1) you’ve been involved in a collision after July 1, 2023, 2) your auto policy renewed (or was issued) after that date as well, and 3) you did not “opt out” of that increase in coverage at your renewal. So, here’s the main thing: When your policy next renews, if your insurance company gives you an option to “opt out” of any kind of underinsured motorist coverage (such as for a small savings on premiums), we strongly recommend you do not opt out of that coverage. It could make a MAJOR difference in the amount available to you, if someone negligently injures you.
What is the old law?
Traditionally, when you buy automotive liability coverage for yourself—with the goal of protecting your own personal assets should you negligently injure another person in a collision—you have also, by state law, purchased an equal amount of “uninsured / underinsured motorist” coverage (without any additional premium). Many people don’t know this, but if you look at your insurance coverage declaration page, you will likely see separate coverage amounts for uninsured / underinsured coverage, equal to the bodily injury liability coverage you bought (often referred to as “UM / UIM”).
This UM / UIM coverage is very important. When someone negligently causes a collision that injuries YOU, the defendant driver is (by law) supposed to have his or her own liability insurance. But, they have only purchased a low level of coverage. If they went cheap, they may have only $25,000 or $30,000 in coverage available to cover YOUR claims for medical expenses, lost income, personal injuries, and pain and suffering. In most cases involving significant collisions causing injury, that is not enough. That’s when YOUR UIM coverage is very important to ensuring full payment on your claim. In our practice, we must frequently look to our client’s “underinsured motorist” coverage under their own policies due to insufficient liability insurance by a negligent driver, even though our client is not at fault.
For instance, assume a liable defendant driver causes $300,000 in injuries to YOU, the plaintiff. The defendant only has $50,000 in liability coverage from Insurer A, and the insurer offers to pay that limit to you. But because YOU have damages well in excess of that $50,000, the defendant driver is underinsured by at least $250,000! YOU have, however, made the smart decision to purchase your own liability coverage from Insurer B of $250,000. Insurer B, by Virginia law, provides you the equal amount of underinsured motorist coverage for yourself, should he get injured by a negligent driver.
However, under previous Virginia law, your Insurer B would get a credit for the initial $50,000 paid by the defendant’s liability Insurer A. That would leave you only an additional $200,000 in potential UIM coverage ($250,000 in total UIM coverage from Insurer B, minus $50,000 paid by Insurer A, leaving $200,000 available in Insurer B’s UIM coverage for plaintiff). Or, in cases where both the defendant and the plaintiff had each purchased identical coverage amounts (for example, each purchased a policy with $50,000 coverage), the UIM coverage was effectively zero, because the credit for the $50,000 in liability coverage wiped out the entire UIM coverage amount of $50,000. In those cases, the plaintiff driver got no benefit at all from his own insurance coverage despite paying premiums for UIM coverage. Instead of $100,000 in coverage available, the injured person only got $50,000 from liability and $0 from UIM.
What’s the difference with the new law?
Virginia has helpfully changed Code section 38.2-2206 to provide that policies (or renewals) after July 1, 2023 must now eliminate this credit for the other driver’s liability limits. As a result, the liability coverage and the UIM coverage are now “stacked” together, totaling a higher coverage. In the above example where the liability coverage was $50,000 and the UIM was $250,000, the result is that $300,000 in coverage is now available! Or, in the case where each coverage has $50,000, there is now $100,000 available! Importantly, the law affects policies issued or renewed after July 1, 2023. This, obviously, is not a change that insurers will like, as it exposes their UIM coverage to a much higher limit. As a result, since you will likely see renewals every 6 months or yearly, your insurer may offer you to save a few bucks by waiving or opting out of this effective benefit of stacking UIM coverage onto liability. If you see that, we recommend you do not take that savings—it could result in a massive difference of insurance coverage for you, at a time when you and your family really need it most. So, keep the coverage–as long as you don’t opt out, it will automatically apply to your new policy or renewal. And it’s important!
Remember, these laws will take effect throughout the state. If you have questions about a collision and your coverage, call us. We regularly litigate cases in Roanoke City and County, Montgomery County (Christiansburg, Blacksburg), Lynchburg, Abingdon, Martinsville, Rocky Mount, Wytheville, Bedford, Covington, Harrisonburg, Richmond, Charlottesville, Lexington, or Staunton. They practice in rural areas like Bath County, Campbell County, Giles County, Craig County, Smyth County, Alleghany County, Pulaski County, Franklin County, Campbell County, Carroll County, Patrick County, Floyd County, Stuart County, Pittsylvania County, Henry County, and Wythe County. They also frequently litigate in Virginia federal courts, including those divisions in Roanoke, Abingdon, Danville, Harrisonburg, Charlottesville, Alexandria, and Richmond.