Auto insurers in Virginia have added a new play to their book of defenses against paying what they should on uninsured-underinsured motorist coverage. Be ready for it when they try it with your client.
Carriers might raise this new defense when your client with a UM claim has also collected workers’ compensation from an employer that self-insures for its own compensation insurance. One such self-insured common to Northern Virginia and Tidewater: the federal government.
Now, when a tort victim has collected such benefits from such a self-insured employer, carriers have begun to argue they can set-off the amount paid against what they would otherwise owe as UM coverage.
Those carriers base that argument on this language from the Virginia-approved UM endorsement’s Limit of Liability section, which says:
- Any damages payable under this coverage:
- With respect to:
- An employee of a self-insured employer shall be reduced by all sums paid or payable because of the “bodily injury” under workers’ compensation or similar law.
That approved language can be read to support private UM carriers that seek a set-off from workers’ compensation self-insureds. But it directly conflicts with the Supreme Court of Virginia’s binding interpretation of the UM statute, Virginia Code § 38.2-2206, specifically subsection I. That section—the Virginia Supreme Court has held—only allows the set-off for employers that self-insure their motor vehicles, and only against payments due under the UM coverage.
That statute states:
“[P]rovided that in the event an employee of a self-insured employer receives a workers’ compensation award for injuries resulting from an accident with an uninsured motor vehicle, such award shall be set off against any judgment for damages awarded pursuant to this section for personal injuries resulting from such accident.” Id.
Keep in mind that Virginia’s General Assembly “has placed self-insurers in a favored status.” Catron v. State Farm Mut. Auto. Ins. Co., 255 Va. 31, 39, (1998). Mindful of policy, the Commonwealth’s high court conclusively stated that § 38.2-2206(I) “allows the employer who self-insures his motor vehicles to set off an employee’s workers’ compensation payments against payments due for uninsured motorist protection.” William v. Newport News, 240 Va. 425, 433 (1990).
That opinion expressly treats commercial auto insurers and self-insurers differently, and it explained why. “By enacting this offset proviso, the General Assembly reinforced and complemented the distinction between commercial and self-insurance of motor vehicles previously recognized” in the Code. Id. (citing Va. Code § 46.2-368.)
Further bolstering William’s result, courts apply the UM statute terms liberally as a remedial statute to help injured persons. Bryant v. State Farm Mut. Auto. Ins. Co., 205 Va. 897, 900 (1965). That rule on how to read terms cements William’s holding limiting who has a set-off. That interpretive rule limits that set-off right to the narrowest possible scope because it decreases the UM coverage available for the insured.
So commercial insurers’ new-fangled attempt to use the text from the UM form to assert a set-off against payments by those employers who self-insure for workers’ compensation (as opposed to motor vehicles), places the insured in a worse place than §38.2-2206(I) would. As with all policy provisions that do not meet the UM statute’s requirements, the endorsement terms on which the commercial carriers rely are void. Bryant, 205 Va. at 900.
The Virginia Bureau of Insurance’s decision to approve that UM endorsement cannot trump the statute enacted by the legislature as interpreted by the state’s supreme court.
Now, insurers’ new efforts should fail, as you are now armed to challenge such attempts at paying less on UM claims when, for example, the USA has paid workers’ compensation to its employees through the Department of Labor.
One final note: shortly before posting this, we learned of another carrier that asserted this set-off.