H. B. 3264
(By Delegates Perry, Michael, Shook,
Azinger, Ashley and Hartman)
[Introduced March 20, 2009; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact §33-6-31 of the Code of West Virginia,
1931, as amended, relating to eliminating the doctrine of
"constructive exhaustion", as enunciated in Horace Mann
Insurance Company v. Adkins, 215 W.Va. 297, 599 S.E.2d 720
(2004), relative to an insured's right to recover underinsured
benefits from the insured's insurance carrier.
Be it enacted by the Legislature of West Virginia:
That §33-6-31 of the Code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:
ARTICLE 6. THE INSURANCE POLICY.
§33-6-31. Motor vehicle policy; omnibus clause; uninsured and
underinsured motorists' coverage; conditions for
recovery under endorsement; rights and liabilities of
insurer.
(a) No policy or contract of bodily injury liability insurance, or of property damage liability insurance, covering
liability arising from the ownership, maintenance or use of any
motor vehicle, shall be issued or delivered in this state to the
owner of such vehicle, or shall be issued or delivered by any
insurer licensed in this state upon any motor vehicle for which a
certificate of title has been issued by the Division of Motor
Vehicles of this state, unless it shall contain a provision
insuring the named insured and any other person, except a bailee
for hire and any persons specifically excluded by any restrictive
endorsement attached to the policy, responsible for the use of or
using the motor vehicle with the consent, expressed or implied, of
the named insured or his or her spouse against liability for death
or bodily injury sustained or loss or damage occasioned within the
coverage of the policy or contract as a result of negligence in the
operation or use of such vehicle by the named insured or by such
person:
Provided, That in any such automobile liability insurance
policy or contract, or endorsement thereto, if coverage resulting
from the use of a nonowned automobile is conditioned upon the
consent of the owner of such motor vehicle, the word "owner" shall
be construed to include the custodian of such nonowned motor
vehicles. Notwithstanding any other provision of this code, if the
owner of a policy receives a notice of cancellation pursuant to
article six-a of this chapter and the reason for the cancellation
is a violation of law by a person insured under the policy,
said the owner may by restrictive endorsement specifically exclude the
person who violated the law and the restrictive endorsement
shall
be is effective in regard to the total liability coverage provided
under the policy, including coverage provided pursuant to the
mandatory liability requirements of section two, article four,
chapter seventeen-d of this code, but nothing in
such
the restrictive endorsement shall be construed to abrogate the
"family purpose doctrine".
(b) Nor shall any such policy or contract be so issued or
delivered unless it
shall contain contains an endorsement or
provisions undertaking to pay the insured all sums which he
or she
shall be is legally entitled to recover as damages from the owner
or operator of an uninsured motor vehicle, within limits which
shall be no less than the requirements of section two, article
four, chapter seventeen-d of this code, as amended from time to
time:
Provided, That such policy or contract shall provide an
option to the insured with appropriately adjusted premiums to pay
the insured all sums which he
or she shall be is legally entitled
to recover as damages from the owner or operator of an uninsured
motor vehicle up to an amount of $100,000 because of bodily injury
to or death of one person in any one accident and, subject to said
limit for one person, in the amount of $300,000 because of bodily
injury to or death of two or more persons in any one accident and
in the amount of $50,000 because of injury to or destruction of property of others in any one accident
: Provided, however, That
such endorsement or provisions may exclude the first $300 of
property damage resulting from the negligence of an uninsured
motorist:
Provided further, That such policy or contract shall
provide an option to the insured with appropriately adjusted
premiums to pay the insured all sums which he
or she shall
is legally
be entitled to recover as damages from the owner or
operator of an uninsured or underinsured motor vehicle up to an
amount not less than limits of bodily injury liability insurance
and property damage liability insurance purchased by the insured
without setoff against the insured's policy or any other policy.
Regardless of whether motor vehicle coverage is offered and
provided to an insured through a multiple vehicle insurance policy
or contract, or in separate single vehicle insurance policies or
contracts, no insurer or insurance company providing a bargained
for discount for multiple motor vehicles with respect to
underinsured motor vehicle coverage shall be treated differently
from any other insurer or insurance company utilizing a single
insurance policy or contract for multiple covered vehicles for
purposes of determining the total amount of coverage available to
an insured. "Underinsured motor vehicle" means a motor vehicle
with respect to the ownership, operation or use of which there is
liability insurance applicable at the time of the accident, but the
limits of that insurance are either: (i) Less than limits the insured carried for underinsured motorists' coverage; or (ii) has
been reduced by payments to others injured in the accident to
limits less than limits the insured carried for underinsured
motorists' coverage. No sums payable as a result of underinsured
motorists' coverage shall be reduced by payments made under the
insured's policy or any other policy.
(c) As used in this section, the term "bodily injury"
shall
include includes death resulting therefrom and the term "named
insured"
shall mean means the person named as such in the
declarations of the policy or contract and shall also include
such
the person's spouse if a resident of the same household and the
term "insured"
shall mean means the named insured and, while
resident of the same household, the spouse of any such named
insured and relatives of either, while in a motor vehicle or
otherwise, and any person, except a bailee for hire, who uses, with
the consent, expressed or implied, of the named insured, the motor
vehicle to which the policy applies or the personal representative
of any of the above; and the term "uninsured motor vehicle"
shall
mean means a motor vehicle as to which there is no: (i) Bodily
injury liability insurance and property damage liability insurance
both in the amounts specified by section two, article four, chapter
seventeen-d of this code, as amended from time to time; or (ii)
there is such insurance, but the insurance company writing the same
denies coverage thereunder; or (iii) there is no certificate of self-insurance issued in accordance with the provisions of said
section. A motor vehicle
shall be deemed is considered to be
uninsured if the owner or operator thereof be unknown:
Provided,
That recovery under the endorsement or provisions
shall be is
subject to the conditions hereinafter set forth.
(d) Any insured intending to rely on the coverage required by
subsection (b) of this section shall, if any action be instituted
against the owner or operator of an uninsured or underinsured motor
vehicle, cause a copy of the summons and a copy of the complaint to
be served upon the insurance company issuing the policy, in the
manner prescribed by law, as though
such the insurance company were
a named party defendant;
such the company shall thereafter have the
right to file pleadings and to take other action allowable by law
in the name of the owner, or operator, or both, of the uninsured or
underinsured motor vehicle or in its own name:
Provided, That,
unless otherwise specified in the insurance contract at issue, no
insured may recover under an underinsured motorist coverage
provision unless the insured has exhausted coverage from all
applicable liability policies of insurance from a third party
tortfeasor.
Nothing in this subsection shall prevent
such the owner or
operator from employing counsel of his or her own choice and taking
any action in his or her own interest in connection with such
proceeding.
(e) If the owner or operator of any motor vehicle which causes
bodily injury or property damage to the insured be unknown, the
insured, or someone in his or her behalf, in order for the insured
to recover under the uninsured motorist endorsement or provision,
shall:
(i) Within twenty-four hours after the insured discover, and
being physically able to report the occurrence of
such
the accident, the insured, or someone in his or her behalf, shall
report the accident to a police, peace or to a judicial officer,
unless the accident
shall has already
have been investigated by a
police officer;
(ii) Notify the insurance company, within sixty days after
such the accident, that the insured or his or her legal
representative has a cause or causes of action arising out of
such
the accident for damages against a person or persons whose identity
is unknown and setting forth the facts in support thereof; and,
upon written request of the insurance company communicated to the
insured not later than five days after receipt of such statement,
shall make available for inspection the motor vehicle which the
insured was occupying at the time of the accident; and
(iii) Upon trial establish that the motor vehicle, which
caused the bodily injury or property damage, whose operator is
unknown, was a "hit and run" motor vehicle, meaning a motor vehicle
which causes damage to the property of the insured arising out of physical contact of such motor vehicle therewith, or which causes
bodily injury to the insured arising out of physical contact of
such the motor vehicle with the insured or with a motor vehicle
which the insured was occupying at the time of the accident. If
the owner or operator of any motor vehicle causing bodily injury or
property damage be unknown, an action may be instituted against the
unknown defendant as "John Doe," in the county in which the
accident took place or in any other county in which
such the action
would be proper under the provisions of article one, chapter
fifty-six of this code; service of process may be made by delivery
of a copy of the complaint and summons or other pleadings to the
clerk of the court in which the action is brought, and service upon
the insurance company issuing the policy shall be made as
prescribed by law as though such insurance company were a party
defendant. The insurance company
shall have has the right to file
pleadings and take other action allowable by law in the name of
John Doe.
(f) An insurer paying a claim under the endorsement or
provisions required by subsection (b) of this section shall be
subrogated to the rights of the insured to whom
such the claim was
paid against the person causing
such the injury, death or damage to
the extent that payment was made. The bringing of an action
against the unknown owner or operator as John Doe or the conclusion
of such an action
shall does not constitute a bar to the insured, if the identity of the owner or operator who caused the injury or
damages complained of, becomes known, from bringing an action
against the owner or operator theretofore proceeded against as John
Doe. Any recovery against
such the owner or operator shall be paid
to the insurance company to the extent that such insurance company
shall have has paid the insured in the action brought against
such
the owner or operator as John Doe, except that
such the insurance
company shall pay its proportionate part of any reasonable costs
and expenses incurred in connection therewith, including reasonable
attorney's fees. Nothing in an endorsement or provision made under
this subsection, nor any other provision of law, shall operate to
prevent the joining, in an action against John Doe, of the owner or
operator of the motor vehicle causing injury as a party defendant,
and such joinder is hereby specifically authorized.
(g) No such endorsement or provisions shall contain any
provision requiring arbitration of any claim arising under any such
endorsement or provision, nor may anything be required of the
insured except the establishment of legal liability, nor shall the
insured be restricted or prevented in any manner from employing
legal counsel or instituting legal proceedings.
(h) The provisions of subsections (a) and (b) of this section
shall do not apply to any policy of insurance to the extent that it
covers the liability of an employer to his or her employees under
any workers' compensation law.
(i) The Commissioner of Insurance shall formulate and require
the use of standard policy provisions for the insurance required by
this section, but use of such standard policy provisions may be
waived by the commissioner in the circumstances set forth in
section ten of this article.
(j) A motor vehicle
shall be deemed is considered to be
uninsured within the meaning of this section, if there has been a
valid bodily injury or property damage liability policy issued upon
such the vehicle, but which policy is uncollectible, in whole or in
part, by reason of the insurance company issuing
such the policy
upon
such the vehicle being insolvent or having been placed in
receivership. The right of subrogation granted insurers under the
provisions of subsection (f) of this section
shall do not apply
as
against any person or persons who is or becomes an uninsured
motorist for the reasons set forth in this subsection.
(k) Nothing contained herein
shall prevent prevents any
insurer from also offering benefits and limits other than those
prescribed herein, nor shall this section be construed as
preventing any insurer from incorporating in such terms, conditions
and exclusions as may be consistent with the premium charged.
(l) The
Insurance Commissioner
of Insurance shall review on an
annual basis the rate structure for uninsured and underinsured
motorists' coverage as set forth in subsection (b) of this section
and shall report to the Legislature on said rate structure on or before January 15, 1983, and on or before January 15 of each of the
next two succeeding years.
NOTE: The purpose of this bill is to eliminate the legal
doctrine of "constructive exhaustion" relative to an insured's
claim for underinsurance under his or her motor vehicle insurance
policy. Specifically, the bill would require that an insured
exhaust all applicable coverages from third party tortfeasors
before claiming underinsured benefits. The Supreme Court in the
case of
Horace Mann v. Adkins, 215 W.Va. 297, 599 S.E.2d 720 (2004)
held that under certain circumstances, the legal doctrine of
"
constructive exhaustion" would allow an insured to collect
underinsured benefits in spite of settling for less than a third
party tortfeasor's full liability limit, so long as the company
paying the underinsurance benefits was given full credit for the
full limits of the third party tortfeasor's insurance (i.e.,
relative to the monetary value of injuries suffered by the insured
above the policy limits of the third party tortfeasor's insurance
policy).
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.