For decades, Virginia courts have allowed bad faith litigation against an automobile liability insurance carrier that unjustly and without a good faith basis refuses to offer a fair settlement within the liability coverage causing the injured person to have to go to court, try their case, and obtain a judgment against the tortfeasor just to obtain a fair recovery for their damages. The law governing bad faith litigation against liability insurance companies who insured the tortfeasor (at fault driver or party) provided a structure to allow the recovery of the excess judgment in certain circumstances when the evidence was proven against the insurer. However, Virginia law did not allow recovery of an excess judgement against a first-party insurer, what is known in auto accident cases as the UM or UIM carrier(s). The reasoning was that the UM/UIM carrier only owed a duty to their insured of paying any judgment above the liability coverage or a judgment against an uninsured motorist up to the amount of the applicable UM/UIM policy limits.

That changed this year.

As of July 1, 2024, Viriginia law now allows bad faith claims against the Virginia policy UM and UIM insurers too. Code of Virginia Section 8.01-66.1 has three additional subsections added. 8.01-66.1(D-F). The new UM/UIM bad faith law allows an injured person who obtains a judgment an accelerated process to obtain bad faith damages:

D. Whenever any insurance company licensed in the Commonwealth to write motor vehicle insurance as defined in § 38.2-124 (i) denies, refuses, fails to pay, or fails to make a timely and reasonable settlement offer to its insured under the provisions of any uninsured or underinsured motorist benefits coverage in a policy of motor vehicle insurance applicable to the insured after the insured has become legally entitled to recover or (ii) after all applicable liability policy limits and underlying uninsured and underinsured motorists benefits have been tendered or paid, rejects a reasonable settlement demand made by the insured within the policy's coverage limits for uninsured or underinsured motorist benefits or fails to respond within a reasonable time after being presented with such demand after the insured has become legally entitled to recover, and it is subsequently found by a court of proper jurisdiction that such denial, refusal, or failure to timely pay or failure to make a timely and reasonable settlement offer, rejection of a reasonable settlement demand, or failure to timely accept a reasonable settlement demand was not made in good faith, in addition to the amount due and owing by the insurance company to its insured on the judgment against the tortfeasor, the insurance company shall also be liable to the insured in an amount up to double the amount of the judgment obtained against the underinsured motorist, uninsured motorist, immune motorist, unknown owner or operator, or released defendant in the underlying personal injury or wrongful death action, not to exceed $500,000, together with reasonable attorney fees for bringing a claim under this subsection, and all costs and expenses incurred by the insured to secure a judgment against the tortfeasor, and interest from 30 days after the date of such denial or failure or the date the reasonable settlement demand was submitted in writing. The insured or the insured's representative may seek adjudication of a claim that the insurance company did not act in good faith as a posttrial motion before the court in which the underlying personal injury or wrongful death judgment was obtained or as a separate action against the company. If the insured or the insured's representative seeks adjudication as a separate action and the underlying judgment is appealed, any action filed under this subsection shall be stayed by the court pending final resolution of the appeal of the underlying judgment.

E. Prior to making a demand under this section, the claimant shall provide notice to the insurer 45 days prior to making such demand along with information and documentation sufficient for the insurer to assess the liability and damages of the claimant.

F. There shall be no action for bad faith under this section if the insurer tenders to the claimant the lesser of the (i) applicable limits of the policy or (ii) monetary amount demanded by the claimant either prior to the insurer's receipt of a settlement offer from the claimant or within 45 days of the insurer's receipt of the notice of the claimant's intent to make a claim and accompanying information and documentation pursuant to subsection E.

For the purposes of this section, the term "legally entitled to recover" means the point in time when liability to the uninsured or underinsured motorist insurance company's insured has become reasonably foreseeable without necessity of a judgment by its insured against an uninsured or underinsured motorist, an unknown owner or operator, or an immune motorist.

If you are injured in an automobile or other motor vehicle accident in Virginia through no fault of your own, call the experienced litigators at Slaughter & Lupton Law, PLLC for a free initial case evaluation.

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Call (757) 699-7100 today.