Statutory Notice to Defendant

VA Code §38.2-2206 (L)

New subsection (L) of VA code §38.2-2206 requires the defendant (the underinsured motorist) sign the liability release along with the plaintiff. Subsection (L) requires the release contain a “Notice to Released Party” (the defendant) describing the new UIM settlement procedure and the defendant’s duty to reasonably cooperate with the UIM carrier.

This is a change from prior law which allowed a liability carrier to settle a liability claim against its insured without the insured defendant’s consent. The reason for this change is that the defendant must receive notice of his/her duty to reasonably cooperate with the UIM carrier in its defense of the UIM claim. Under the new 2016 Virginia UIM Settlement Procedure if the defendant does not reasonably cooperate under Virginia Code §8.01- 66.1:1, the UIM carrier’s subrogation rights against him are revived.

1. The “Alternative” Method of Notice to the Defendant
   
   Many times defendants “go missing” and can not be found. Recognizing this “fact of life”, new subsection (L), last sentence, gives the liability carrier a way out – simply mail the required statutory “Notice to Released Party” to the defendant’s last known address, certified mail, return receipt requested.
   
   Most liability carriers will likely use the “alternative” method as a last resort after first attempting to locate the defendant. However the statute does not prohibit the liability carrier from using the “alternative” method in the first instance.


2. Notice to the Defendant under VA Code §38.2-2206 (L) - When the defendant can't be reached
   
   Joe Brown runs a red light crashing into plaintiff Priscilla Pristine causing major injury to her. Priscilla Pristine’s case is worth a lot more than Joe’s minimum liability limits with Geico of $25,000.
   
   Geico settles the plaintiff’s liability claim against its insured, Joe. Priscilla signs the release and her attorney sends it back to Geico who mails it to Joe’s address requesting he sign the release containing the statutory “Notice to the Released Party”. No response from Joe, who is in Mexico on a 60-day vacation. Twenty one days after mailing the release, Geico again sends the release to Joe’s address – this time by certified mail, return release requested using the alternative method set forth in the last sentence of §38.2-2206 (K). Joe is still in Mexico on vacation. Having received no response from Joe, Geico sends a check for $25,000 to the plaintiff’s lawyer in settlement of the plaintiff’s claim against Joe. Joe Brown returns from his vacation and refuses to consent to the settlement claiming the plaintiff, Priscilla Pristine, ran the red light, not him. Geico now wants its money back because Joe didn’t give his consent to the settlement. State Farm, the plaintiff’s UIM carrier, now denies Priscilla’s UIM claim on the grounds that Priscilla does not get the benefit of the new UIM statutory protections because Joe Brown, the defendant, refused to consent to the settlement as required by the new §38.2-2206 (L). As a result, State Farm argues, the plaintiff violated State Farm’s “consent to settle clause” and destroyed its “subrogation rights” against the defendant, Joe Brown. You are Priscilla Pristine’s lawyer. You ask what happens now?
   
   Result: Geico correctly followed the “alternative” method of notifying Joe, the “released party”. But, more importantly, “upon payment to the plaintiff of the agreed settlement amount”, Geico’s duty to defend and the UIM insurance company’s subrogation rights were terminated. §38.2-2206 (K) mandates “upon payment of the liability carrier’s available limits to the [plaintiff]”, the UIM carrier’s subrogation rights end, and, by implication, its “consent to settle” rights. “Upon payment” the liability settlement is complete and the “game is over” for Joe Brown and Geico. However, Joe is free to contest liability in the plaintiff’s claim against State Farm for UIM benefits. And, as long as Joe reasonably cooperates with State Farm, State Farm can not revive its lost subrogation rights against Joe.


3. Geico clerk sends notice by Regular Mail
   
   Question: Assume the mail clerk at Geico erroneously sent the release signed by the plaintiff, containing the required “Notice to Released Party” to Joe by regular mail instead of by “certified mail, return receipt requested” as required by new subsection (L) of VA Code §38.2-2206 as the “alternative” method of notifying the defendant under the new UIM Settlement Procedure. Would the result change?
   
   Answer: Probably not. Even though Geico failed to follow the correct statutory procedure by using certified mail, return receipt requested, Geico paid the plaintiff. “Upon payment” of the available liability limits under the new Virginia UIM law, Geico’s duty to defend and State Farm’s subrogation and consent to settle rights are extinguished. Joe is freed completely from having to pay an excess judgement to the plaintiff and from State Farm’s subrogation if Joe reasonably cooperates with State Farm.

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