Virginia Underinsured Motorist Coverage for Punitive Damages Against Drunk Drivers

The new 2016 UIM settlement procedure law abolishes subrogation if the defendant reasonably cooperates with the UIM carrier. As a result, the drunk driver pays no punitive damages – the UIM carrier does. Does this fact now allow a defense lawyer to tell the jury that it is the plaintiff’s UIM carrier, not the drunk driver, who pays the punitive damage award?

Answer: No.

In Lipscombe v. Security Ins. Co. 213 Va. 81(1972) the jury awarded compensatory and punitive damages against an uninsured drunk driver. The UM carrier argued that if it paid the punitive damage award, it would thwart Virginia’s public policy of discouraging drunk driving. The Supreme Court of Virginia ruled against the UM carrier because the UM carrier could subrogate against the drunk driver thereby placing the ultimate burden of paying punitive damages on the drunk driver. As a result, the court ruled that the UM carrier’s payment of punitive damages to the plaintiff did not contravene Virginia public policy.

Since subrogation by UIM carriers was eliminated by the new 2016 settlement procedure law, some lawyers were concerned that UIM carriers would argue that payment of the punitive damage award against a drunk driver, without the ability to subrogate, would contravene public policy in accordance with the 44 year old Lipscombe decision.

This concern is not well founded because of the passage of Virginia Code §38.2-227 eleven years after Lipscombe was decided. Virginia Code §38.2-227 provides:

“It is not against public policy of the Commonwealth for any person to purchase insurance providing coverage for punitive damages.”

In Travelers Ins. Co. v. Lobello, 212 Va. 534 (1972) the Supreme Court of Virginia gave guidance on what a defense lawyer representing a UM/UIM carrier could tell the jury about his/her role in the case. Here is what the Supreme Court said:

“The attorney for Travelers should have been allowed to tell the jury, without identifying himself as insurance counsel, only that he was present in court to assist Shelton in his defense. This would have sufficiently explained the attorney’s presence and would have prejudiced neither Cox nor any of the other litigants.”

In Allstate v. Wade, 265 Va. 383 (2003) defense counsel for the UM carrier, Allstate, in a case against an uninsured drunk driver for compensatory and punitive damages argued that it was against Virginia public policy for the UM carrier to pay the punitive damage award. Allstate’s defense lawyer waived subrogation against the drunk driver to enhance Allstate’s argument that the drunk driver would go unpunished and pay nothing. The Supreme Court of Virginia rejected Allstate’s argument holding:

“Allstate’s purported waiver of its subrogation rights is also immaterial. Since this Court’s decision in Lipscombe, the General Assembly has enacted Code §38.2-227 which specifically sate that ‘[it] is not against the public policy of the Commonwealth for any person to purchase insurance providing coverage for punitive damages’ awarded in personal injury negligence cases. This policy allowing payment of punitive damages by insurers is not contingent upon whether such insurer can or will exercise rights of subrogation.

Finally, punishment of the wrongdoer is not the only purpose of punitive damages. An award of punitive damages also serves the purposes of protecting the public and of providing an example and warning to deter others from engaging in the same or similar conduct. (citation of cases omitted)

In summary, applying the principles established in Lipscombe, Lobello and Code §38.2-227, we conclude that the trial court correctly refused Allstate’s request to inject insurance into this case because of the potential for prejudice to the plaintiffs and that the trial court’s ruling was consistent with the public policy of the Commonwealth.”

Any attempt by a UIM carrier to (1) tell the jury that the plaintiff’s UIM carrier will pay the punitive damage award, or (2) argue payment of punitive damages by the UIM carrier is against public policy because the new statute eliminates subrogation against the drunk driver, or (3) tell the jury defense counsel represents the plaintiff’s UIM carrier or suggest underinsured motorist coverage is involved in the case, should be met with a strong objection citing Allstate v. Wade, supra, which held these arguments improper.

If you have been injured or a loved one has been killed by a drunk driver, you may be entitled to punitive damages. For help holding drunk drivers accountable, call personal injury lawyer Gerald Schwartz. With more than 30 years experience, Gerald Schwartz will help you hold wrong-doers accountable.