Virginia Laws Are Changing.
The year 2023 will bring a welcome, long-needed change to Virginia’s uninsured/underinsured motorist coverage law.
First, a reminder on this topic that we’ve posted about before: we advise our clients that every car garaged in Virginia should be insured with as much liability insurance coverage as the owner(s) can afford. That is because, in Virginia, liability coverage is the key to uninsured and underinsured coverage (“UIM”). For instance, if somebody with the minimum amount of liability insurance crashes into your car and you are injured, his or her liability coverage may be as little as $30,000. (Indeed, while most cars are covered under policies of liability insurance, liability coverage is not required in Virginia at all if the driver pays a $500 uninsured fee to the DMV, which leaves you totally out of luck unless you have adequate UIM.) A lengthy hospitalization for serious injuries could easily exceed that $30,000. However, if you carry liability insurance on your own vehicle, you automatically have the same amount in UIM coverage. How to calculate the amount can get complicated so I offer this only as a general proposition and as a segway to the changes to UIM law coming in 2023.
What is the “old law” we’re leaving behind? I call it the UIM “liability payment credit” and here’s an example of how it works. Let’s say you are in a crash and have $500,000 in medical bills. For liability insurance policies issued before July 1, 2023, if you have $300,000 liability coverage on your car (meaning that you also have $300,000 UIM coverage), and the at-fault driver has $100,000 liability coverage that his insurance company pays you to settle your claim, your UIM carrier gets a credit of $100,000 against the $300,000 of UIM coverage. This means that the maximum amount the UIM carrier would have to pay is $200,000. ($300,000 – $100,000 = $200,000) In that instance, your injuries would be un-compensated to the tune of $200,000.
The good news is that for policies issued after July 1, 2023, the liability insurance payment credit against UIM coverage will no longer exist—except as explained below. Using the example above, if you have $500,000 of medical bills and the bad driver’s insurance company pays you their liability limits of $100,000, your UIM carrier (meaning your own liability insurance company) will no longer be entitled to the $100,000 liability payment credit. This reduces the shortfall from $200,000 to $100,000. While this is not perfect, it’s way better. (But it also means that we will continue to advise our clients to carry as much liability coverage as they can afford.)
One danger, though (here’s the exception)—and this is important—is that after July 1, 2023, your insurance company may offer you the option to forgo the new law in exchange for a small reduction in premium. If you make this election, the UIM insurance company will still get the liability credit setoff, and you’ll be right back in the pre-July 1, 2023 situation. Personally, I won’t do it.
Seem complicated? It is. Our Personal Injury Team has over 85 years of experience representing people involved in motor vehicle accidents and with insurance issues like these. We are skilled at determining the availability of insurance to cover you when you are in a motor vehicle crash and need help to find your way through the legal jungle to get what you and your loved ones deserve.
Frank Hilton
Partner
