Virginia Auto Insurers Tread Softly: An Underinsured Motorist Carrier's Good Faith Duty (or Lack Thereof) before Judgment

Abstract

The duties of a bodily injury (BI) carrier and an underinsured motorist (UIM) carrier are patently different. The BI carrier has the “duty to defend” and to “exercise good faith,” while the UIM carrier does not have this responsibility. As a result of the inherently different protections of BI coverage and UIM coverage, “[w]hen tort litigation ensues, the liability insurer is the insured’s defender; the [UIM] insurer is the insured’s adversary.” Although the UIM carrier does not have the same obligation in conducting settlement negotiations as the BI carrier, does the UIM carrier have a duty to make a settlement offer to the insured before judgment is entered against the at-fault party? In the past, the UIM carrier’s obligation to make a settlement offer was prompted only by judgment—as opposed to being prompted by the BI carrier’s settlement offer or payment of policy limits to the insured. This Note affords insight into the problem and provides guidance for good faith UIM claims handling.