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January 22, 2018

Legislation Introduced in Virginia to Expand Bad Faith & Extra-Contractual Liability in Uninsured/Underinsured Motorist Claims

The Virginia legislature has introduced proposed legislation regarding an insurance company’s bad faith in uninsured/underinsured motorist claims. The proposed bill provides that if an insurance company denies, refuses or fails to pay its insured, or refuses a reasonable settlement demand within policy limits for an uninsured/underinsured motorist claim within a reasonable time after receiving the demand and it is subsequently found that the denial, refusal or failure was not in good faith, then the insurance company shall be liable to its insured for the full amount of the judgment and reasonable attorney fees, expenses, and interest, even if those amounts are in excess of policy limits. The bill, which was offered on January 10, 2018, would amend §§ 8.01-66.1 and 38.2-2206 of the Code of Virginia.

The proposed bill is a legislative response to the Virginia Supreme Court’s ruling last Spring in Manu v. GEICO Casualty Company, 293 Va. 371 (2017). In Manu, the Supreme Court ruled that a UM carrier owes no duty to its insured to participate in the tort liability trial against the uninsured tortfeasor or to defend, adjust or settle a demand for payment under a UM policy prior to judgment being entered against the uninsured tortfeasor. The proposed bill would supersede Manu and impose a pre-judgment duty of good faith in responding to settlement demands on UM claims.

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