Can I Sue My Car Insurance Company in Virginia? Underinsured Motorist Coverage & Virginia’s Bad Faith Law
You’ve been injured in a Virginia car or truck crash. Let’s say the at-fault driver has the minimum auto insurance coverage under Virginia law, which is currently $30,000 and is set to increase to $50,000 on January 1, 2025.[1] But you have over $110,000 in medical bills. What do you do? Does Virginia law allow you to sue your own car insurance company?
On these facts alone, you cannot sue your own car insurance company. However, under Virginia law, there are two ways you can recover compensation from your own car insurance company: (1) through your auto policy’s uninsured (UM) or underinsured motorist (UIM) coverage, or (2) when your insurance company fails to act in good faith when handling your UM or UIM claim.
I. Uninsured/Underinsured Motorist Coverage
Although you cannot generally sue your own car insurance company (unless they fail to act in good faith as discussed below), your insurance company is on the hook for paying claims where the at-fault driver lacks insurance (this is when UM coverage kicks in) or where the at-fault driver does not have enough insurance (this is when UIM coverage kicks in).
Technically, Virginia law requires every motorist to have auto insurance.[2] So theoretically, you should not have to use your uninsured motorist coverage if the at-fault driver’s vehicle is registered in Virginia. However, according to the Insurance Research Counsel, 1 in 8 drivers in the United States did not have car insurance as of 2019.[3] Therefore, the reality is that many drivers do not have insurance, which is why uninsured motorist coverage remains important.
As Virginia car and truck accident attorneys, we commonly see the situation described in the first paragraph of this article—where the at-fault driver has minimum insurance coverage and the injured person’s damages clearly exceed at-fault driver’s liability limits. In this situation, you can make a claim with your own insurance company under the underinsured motorist portion of your policy. When pursuing an underinsured motorist claim, any lawsuit is still against the at-fault driver, but the judgment can be enforced against the underinsured motorist carrier.[4]
If you have a Virginia car insurance policy, you have underinsured motorist coverage in at least the amount of the minimum limits.[5] You may have more underinsured motorist coverage. You can check the amount of your underinsured motorist coverage by requesting a copy of the “declarations page” of your policy from your insurance agent. Generally, you can download a copy of the declaration page from your insurance company’s website or mobile app.
We frequently have to inform catastrophically injured clients that the total insurance coverage available is less than their medical bills. For this reason, we strongly encourage everyone to purchase as much underinsured motorist coverage as they can comfortably afford. Many carriers offer umbrella policies with UM/UIM coverage, which provides significant protection if you or a household relative are involved in a crash caused by a driver who lacks insurance or does not have enough insurance.
II. Virginia’s Bad Faith Law
There are certain circumstances where you can sue your own car insurance company in Virginia. Let’s say you are T-boned by a driver who ran a red light, and you have $110,000 in hospital bills. The at-fault driver is ticketed for running the red light and prepays his ticket. You hire a personal injury attorney, and your attorney determines that the at-fault driver has $50,000 in liability coverage, and you have $50,000 in UIM coverage. You decide to settle with the at-fault driver for the $50,000 in liability coverage because your lawyer’s investigation reveals that the at-fault driver does not have any significant personal assets.
Your personal injury attorneys then make a settlement demand to your insurance company for the additional $50,000 in UIM coverage. The settlement demand includes the following: documentation of the policy limits settlement with the liability carrier, the crash report, documentation of the driver’s prepayment of the ticket, your medical records, your hospital bills, and photographs of your injuries and the damage to the vehicles involved. The settlement demand gives your insurance company 45 days to respond. Two months go by, and then the UIM carrier sends a letter to your attorney that denies your claim without explanation. Your attorney later takes your case to trial and a jury awards you $215,000.
Under the above circumstances, you likely have a bad faith claim against your car insurance company, meaning you could bring a lawsuit against your own car insurance company. Virginia Code § 8.01-66.1(D)-(F) outlines Virginia’s “bad faith” law when dealing with a UM/UIM carrier. Virginia’s bad faith law applies to any claims for personal injury or wrongful death arising out of a motor vehicle accident that occurs on or after July 1, 2024.
Specifically, Virginia Code § 8.01-66.1(D) requires your car insurance company to act in good faith when handling your UIM claim. In the above example, your car insurance company likely failed to act in good faith by denying the claim without explanation, although your attorney gave them 45 days to respond and provided them with sufficient information and documentation to determine that the other driver was at fault and your damages clearly exceeded the $100,000 in total insurance coverage.
Virginia’s bad faith law allows you to recover the following damages:
1: “[T]he amount due and owing by the insurance company to its insured on the judgment against the tortfeasor;”
2: “[A]n amount up to double the amount of the judgment obtained against the underinsured motorist . . . not to exceed $500,000;”
3: “[R]easonable attorney fees for bringing [the bad faith] claim;”
4: “[A]ll costs and expenses incurred by the insured to secure a judgment against the tortfeasor;” and
5: “[I]nterest from 30 days after the date of such denial or the failure or the date the reasonable settlement demand was submitted in writing.”[6]
Therefore, assuming you can prove that your insurance company failed to act in good faith when handling the claim through either a posttrial motion or a separate lawsuit, your insurance carrier could be responsible for the following damages:
1: $50,000, which represents the UIM coverage that your insurance company owes because your damages exceeded the at-fault motorist’s $50,000 in insurance coverage;
2: $430,000, which represents damages “double the amount of the judgment obtained against the underinsured motorist . . . not to exceed $500,000;”
3: Your attorney’s fees for bringing the bad faith claim;
4: Your costs and expenses incurred to secure the judgment; and
5: Interest from 30 days after the denial, failure to act in good faith, or the submission of the demand.
Due to your insurance company’s failure to act in good faith and failure to pay your valid claim, they have turned your $100,000 case ($50,000 in liability coverage plus $50,000 in UIM coverage) into a case that is likely worth over half a million dollars. For this reason, it is imperative that your Virginia personal injury attorneys are intimately familiar with Virginia’s bad faith law. Your attorney must comply with technical requirements or he or she may give up your ability to sue your insurance company. Specifically, the bad faith law requires your attorney to give the insurance company 45 days’ notice when making a demand and provide them with “information and documentation sufficient for the insurer to assess the liability and damages.”[7]
III. Virginia Car and Truck Accident Attorneys
Our Virginia car and truck accident attorneys are familiar with Virginia’s bad faith law, which can be a powerful tool when negotiating your UM or UIM claim. If you need legal assistance in pursuing an uninsured, underinsured, or bad faith claim, please do not hesitate to contact us.
[1] See Va. Code § 46.2-472.
[2] See Va. Code § 46.2-706.
[3] One in Eight Drivers Uninsured, Insurance Research Council (March 22, 2021), https://www.insurance-research.org/sites/default/files/downloads/UM%20NR%20032221.pdf.
[4] See Va. Code § 38.2-2206(M).
[5] See Va. Code § 38.2-2202(B).
[6] Va. Code § 8.01-66.1(D).
[7] See Va. Code § 8.01-66.1(E)-(F).
