UIM Traps

1. The Excess Liability Trap
   
   Defendant Don Denver while driving, with permission, his neighbor’s car, negligently injures Priscilla Pristine insured with State Farm with UM/UIM limits of $100,000. The neighbor’s car involved in the crash is insured with Nationwide for $25,000 and the defendant, Dan, is insured with Geico for $25,000 in liability coverage. All policies were renewed in 2016 before the crash.
   
   Nationwide, which insures the car the defendant was driving offers its $25,000 liability limits. The plaintiff’s lawyer, Jimmy Quick, immediately accepts. The plaintiff signs a full release, releasing Dan, the defendant, and Nationwide. Defendant Dan also signs the release. Nationwide’s check for $25,000 is received by the plaintiff’s lawyer. The liability settlement with the defendant and Nationwide is finalized “upon payment”. The plaintiff’s lawyer has fallen into the “excess liability trap”. The plaintiff, Priscilla Pristine, signed a “full release” against the defendant, Dan, which “ensures that no judgement can ever be entered against [Dan] by the claimant/plaintiff [Priscilla]” (§38.2-2206 (L) (2016)). Since the defendant, Dan, is released in full, the excess carrier for Dan owes no duty to pay Priscilla Pristine. The plaintiff has lost $25,000 because her lawyer fell into this “excess liability trap” for the unwary.
   
   To avoid this trap, always look for excess liability coverage. Also, make sure to obtain offers of the available policy limits from all primary and excess liability carriers before bringing a UIM claim.


2. The Joint Tortfeasor Release Trap
   
   Two negligent drivers jointly injure Priscilla Pristine, driver A and driver B, each having $25,000 in liability coverage. Priscilla Pristine has $100,000 in UM/UIM coverage with State Farm. All policies renewed in 2016 before the crash. Since Priscilla Pristine’s case is worth $200,000, she is entitled to the following coverage: Driver A – liability $25,000. Driver B – liability $25,000. State Farm UIM – Driver A -- $75,000 and State Farm UIM – Driver B -- $75,000 for total liability and UIM coverage of $200,000.
   
   If Priscilla Pristine’s lawyer, Jimmy Quick, settles first with Driver A, signing a standard release and receiving payment from Driver A’s liability carrier, Lawyer Quick has released Driver B and his liability carrier. The standard auto liability release generally releases all joint tortfeasors with the language:
   
   

   “The undersigned [plaintiff] hereby releases and forever discharges [Defendant A]... and all other persons, firms or corporations liable or who might be claimed to be liable... to the undersigned [plaintiff] from any and all claims... on account of injuries which have resulted from... an accident which occurred on or about May 5, 2016 at or near 2827 Duke Street in Alexandria, Virginia”.

   
   
   Virginia Code §8.01-35.1 entitled “Effect of Release or Covenant Not to Sue in Respect to Liability and Contribution”, protects a plaintiff who signs a release and settles a case with one joint tortfeasor stating that:
   
   

   “It [the release] shall not discharge any other person [Driver B] from liability from injury... unless the terms so provide...”

   
   
   Well, the terms of the release with Driver A “so provide” by the language commonly seen in auto liability releases “all other persons”. As a result, Lawyer Quick has fallen into the “Joint Tortfeasor Release Trap”. He has lost $25,000 in Driver B’s liability coverage.
   
   What about the plaintiff’s UIM claim for Driver B with State Farm for $75,000? Answer: Lost, because the plaintiff released joint-tortfeasor, Driver B, when she released Driver A. The plaintiff’s lawyer, Jimmy Quick, never settled with Driver B’s liability insurance carrier and therefore does not get the benefit of the new statute. As a result of Driver B being released without the protection of the new statutory changes, the plaintiff’s lawyer has violated State Farm’s consent to settle clause and subrogation rights as to Driver B, and loses the UIM claim for $75,000 as to Driver B.
   
   Lawyer Jimmy Quick could have avoided this trap by simply crossing out “and all other persons...” from the Driver A release.


3. The Two Joint Tortfeasors One Insured : One Not Trap
   
   Same facts as the last example, except Driver B is uninsured or is an unknown driver (John Doe) also uninsured. Priscilla Pristine brings a liability claim against Driver A (insured with Geico) and a UM claim against John Smith (or John Doe), an uninsured driver. Plaintiff’s lawyer, Jimmy Quick, settles first with Driver A’s carrier, Geico, and proceeds next against the uninsured driver under plaintiff’s State Farm policy. This time, Lawyer Quick learned his lesson and crossed out “All other persons...” from the Geico release for Driver A. But State Farm refuses to pay the UM claim against the uninsured driver, John Smith (or John Doe). Lawyer Quick, by settling with Driver A, violated State Farm’s subrogation rights against Driver A (Geico). How can this be? Doesn’t the plaintiff get the benefit of the new statute? Answer: No. The new statute (2016) deals with UIM claims, not UM claims. Since the plaintiff’s claim is against an uninsured, known or unknown, defendant, it is a UM claim and she does not get the benefit of the new statute. Lawyer Quick has fallen into another trap for the unwary – the “Two Joint Tortfeasors One Insured : One Not Trap”. See Virginia Farm Bur. Mut. Ins. Co. v. Gibson, 236 Va. 433 (1988).


4. The Two Joint Tortfeasors: One New Law – The Other Old Law Trap
   
   Priscilla Pristine is injured by two negligent joint tortfeasors. Driver A is insured with Allstate for $50,000 with the policy renewing on April 1, 2016 before the crash. Driver B is insured with Bankers for $50,000 with the policy set to renew after the crash of May 5, 2016. Priscilla’s case has a value of $100,000. She is entitled to $50,000 in liability coverage from each Driver A and Driver B for a total of $100,000. In addition, Priscilla has UM/UIM coverage with Progressive for $100,000. Her policy renewed on April 15, 2016, before the crash. She is afforded $100,000 in UIM from Progressive since each Driver A and Driver B is underinsured by $50,000. Priscilla’s lawyer, Jimmy Quick, settles with Driver A (Allstate) under the new 2016 statute and with Driver B under the old statute. Driver B’s policy renewed after the crash in 2016 so the new settlement procedure statute does not apply to Driver B.) Progressive, the plaintiff’s UIM carrier, denies the plaintiff’s UIM claim against Driver B because Priscilla’s attorney, Jimmy Quick, settled her liability claim without the consent of her UIM carrier, Progressive, and prejudiced Progressive as it lost its subrogation rights against Driver B when the plaintiff signed the liability release with Driver B (Bankers Insurance Company). The new law allows the plaintiff to settle with Driver A because Driver A’s policy renewed before the crash in 2016, but not with Driver B as his policy did not renew until after the crash in 2016. NB: The first step is to find the date of each policy to make sure the new settlement procedure, which allows the plaintiff to settle her liability claim without prejudice to her UIM benefits, applies.
   
   What lawyer Jimmy Quick should have done was to call the plaintiff’s UIM carrier, and request that Progressive waive its subrogation rights as to Driver B and give its consent to settle. If Progressive refuses, all claims should be settled under the old procedure. Nothing can be settled without the UIM carrier’s consent under the old law. This forces the plaintiff to obtain a judgement unless the UIM carrier agrees to waive its subrogation rights before trial.


5. Two UIM Carriers: One New Law – One Old Law Trap
   
   Defendant A negligently injures the plaintiff, Priscilla Pristine. Defendant A is insured with Allstate for $25,000. His policy renewed on April 1, 2016, before Priscilla’s May 1, 2016 crash. Priscilla is insured with Progressive with $100,000 in UM/UIM coverage. Her Progressive policy renewed before the crash on April 15, 2016. Priscilla resides with her Mom, insured with Montgomery Mutual for $100,000 in UM/UIM benefits. The mom’s policy is set to renew after the crash on June 1, 2016. Priscilla is allowed to stack her mother’s $100,000 as she is a resident relative (family member) under her mom’s Montgomery Mutual policy for a total of $200,000 in UM/UIM coverage. Defendant A is underinsured by $175,000 ($200,000 - $25,000 = $175,000).
   
   Plaintiff settles with Defendant A for $25,000 and with her UIM carrier, Progressive for $75,000 under the new law. Progressive receives the statutory credit of Defendant A’s $25,000. The plaintiff’s mom’s carrier, Montgomery Mutual, affords another $100,000 in UIM coverage as Priscilla’s case is worth $200,000. But, Montgomery Mutual argues it doesn’t have to pay since its policy renewed on June 1, 2016, after the crash. Montgomery Mutual argues that the legislation enacting the new UIM settlement procedure law states “The provisions of this act shall apply to policies issued or renewed on or after January 1, 2016”. And since the Montgomery Mutual UIM policy renewed after the crash, it argues, the old law applies. Further, it argues that since the plaintiff settled with Defendant A and with Progressive, she violated Montgomery Mutual’s “consent to settle” clause and destroyed its subrogation rights. As a result, Montgomery Mutual argues it owes plaintiff no UIM benefits.
   
   Is Montgomery Mutual correct? Probably No (with no guarantee). See “Does the Date of Issue / Renewal for a UIM Policy Matter?”
   
   To be safe, it is a good idea, for accidents that occur in 2016, to call the UIM carrier, here Montgomery Mutual, before settling with anyone, to obtain its position on whether the new settlement law requires its UIM policy to have been issued or renewed in 2016 before the plaintiff’s crash. If yes, ask for its consent to settle. If denied, it may be safer to settle under the old law to avoid litigation of the issue and a possible loss of UIM coverage. Beginning with accidents that happen in 2017, there should be no problem since both liability and UIM policies should have been issued or renewed on or after January 1, 2016.

Throughout May 2016, Gerald Schwartz teaches other attorneys how to navigate new settlement procedures in Virginia UIM (underinsured motorist) cases. If you need help with a 2016 car accident injury case, call Gerald Schwartz today.