A new Virginia law curbs UIM insurers' subrogation rights and overhauls how underinsured motorist claims are settled across the Commonwealth.
House Bill 107, sponsored by Delegates Jason Ballard and Will Davis, was enrolled and approved during the 2026 legislative session. The act amends and reenacts Sections 8.01-66.1:1 and 38.2-2206 of the Code of Virginia. Together, these amendments create a defined framework governing the settlement of claims involving underinsured motorists, the cooperation obligations of those motorists after settlement, and the mechanics of any subsequent action to recover underinsured motorist benefits.
Under the amended Section 38.2-2206, an injured person, or a personal representative in cases of death or disability, may now settle a claim with a liability insurer – including any insurer providing liability coverage through an excess or umbrella insurance policy or contract – and the liability insurer's insured for the available limits of the liability insurer's coverage. Upon settlement with the liability insurer, the injured party or personal representative executes a full release in favor of the underinsured motorist's liability insurer and its insured, and finalizes the proposed settlement without prejudice to any underinsured motorist benefits or claim. A release that states it is being executed pursuant to or consistent with the new subsection K of Section 38.2-2206 does not operate to release any parties other than the liability insurer and the underinsured motorist, regardless of the identities of the released parties set forth in the release. Any terms in the release that are inconsistent with or in violation of the section are null and void. The act also states that the section provides an alternative means by which the parties may resolve claims and does not eliminate or restrict any other available means.
Once the liability insurer pays its available limits to the injured person or personal representative or their attorney, the liability insurer has no further duties to its insured, including the duty to defend its insured if an action has been or is brought against the liability insurer's insured. At the same time, the insurer providing applicable underinsured motorist coverage has no right of subrogation or claim against the underinsured motorist. That protection, however, is conditional. If the underinsured motorist unreasonably fails to cooperate with the UIM insurer in the defense of any lawsuit brought by the injured person or his personal representative, the motorist may again be subjected to a subrogation claim by the UIM insurer under the amended Section 8.01-66.1:1.
The act expressly provides that nothing in this section or Section 8.01-66.1:1 creates any duty on the part of any UIM insurer to defend any underinsured motorist. It further clarifies that no attorney-client relationship is created between the underinsured motorist and counsel for the UIM insurer without the express intent and agreement of the underinsured motorist, the UIM insurer, and counsel for the UIM insurer.
The amended Section 8.01-66.1:1 details what cooperation looks like and when the presumption of failure arises. A UIM insurer that pays benefits to its insured, whether by settlement or payment pursuant to a judgment, has no right of subrogation against any individual or entity who settled with its insured under subsection K – unless the underinsured motorist failed to reasonably cooperate in the defense of any lawsuit brought against the motorist. The act creates a rebuttable presumption that the motorist has failed to reasonably cooperate if the motorist fails or refuses to attend a deposition or trial when subpoenaed at least 21 days in advance of either event, assist in responding to written discovery, meet with defense counsel for a reasonable period of time after reasonable notice – by phone or in person – within 21 days after the UIM insurer is served with any lawsuit and again prior to deposition and trial, or notify counsel for the UIM insurer of any change in address.
The underinsured motorist may rebut that presumption. If a court finds that the motorist's failure to cooperate was not unreasonable, or that the motorist otherwise acted in good faith in attempting to comply with the duty to reasonably cooperate, the UIM insurer does not regain its right of subrogation.
The act also places a financial obligation on the UIM insurer seeking the motorist's cooperation. The insurer must pay the reasonable costs and expenses related to procuring that cooperation, including any travel costs if the motorist resides more than 100 miles from the location of the deposition or trial. A court may consider travel costs in determining whether the motorist's failure to cooperate was unreasonable. If the court finds the motorist satisfied the duty to cooperate or that any failure was not unreasonable, the court may award the motorist costs in defending the subrogation action, including reasonable attorney fees.
The law introduces a mandatory written settlement and notice requirement. Any settlement between the injured person or personal representative, any insurer providing liability coverage applicable to the claim, and the underinsured motorist described in subsection K must be in writing, signed by both the injured person or personal representative and the underinsured motorist, and must include a prescribed notice to the motorist that must be initialed. The notice informs the motorist that the liability insurer has agreed to pay its available limits to settle claims on the motorist's behalf, that the settlement secures a full release and ensures that no judgment can ever be entered against the motorist by the claimant or plaintiff, and that in exchange, the motorist is agreeing to cooperate with the UIM insurer. The notice outlines the cooperation obligations – attending depositions and trial if subpoenaed, assisting with discovery, meeting with defense counsel at reasonable times after commencement of the suit and before testimony at deposition or trial, and notifying the UIM insurer or its defense counsel of any change in address – provided that the UIM insurer or its defense counsel has notified the motorist of its existence and provided contact information.
The notice also advises the motorist of the consequences of declining this arrangement. If the motorist does not consent, the liability insurer will continue to defend the motorist in any lawsuit, but the motorist will not have the protections of a full release, judgment could be entered against the motorist and may exceed available insurance coverage, and any UIM insurer would have a right of subrogation against the motorist to recover any moneys it pays to the claimant or plaintiff. The motorist is encouraged to discuss rights and obligations related to settlement with the liability insurer or an attorney. As an alternative to obtaining the motorist's signature and initials, the liability insurer may send the notice and release by certified mail, return receipt requested, to the motorist's last known address, which will be deemed to have satisfied the requirements of the subsection.
The act also addresses how litigation proceeds after settlement. Any action brought by the injured person or personal representative to recover underinsured motorist benefits after payment of the liability insurer's available limits is to be brought against the released defendant by name. A copy of the complaint must be served on any insurer providing underinsured motorist benefits but is not required to be served on the released defendant. If an action is already pending at the time the liability limits are paid, it remains pending against the named defendant or defendants who have been released. If the action results in a verdict in favor of the injured person or personal representative against a released defendant, judgment as to that defendant is entered under the designation Released Defendant, without identifying the released defendant's name, and is enforceable against the UIM insurer – not to exceed the underinsured motorist benefits limits – and against any unreleased defendant, as though it were entered in the actual name of the released defendant.
For settlements involving persons under a disability or wrongful death claims, the act provides that any proposed settlement between a liability insurer and a person under a disability or a personal representative that compromises in part a claim for personal injuries or for death by wrongful act may, but is not required to, be approved by a court. If the personal representative elects not to seek court approval, any payment from the liability insurer must be made payable to the representative's attorney and held in trust, or paid into court if the representative is not represented by an attorney, with no disbursements until the compromise is approved. Court approval of the settlement with the liability insurer does not prejudice the claim for underinsured motorist benefits.
The existing requirements for uninsured and underinsured motorist coverage endorsements remain intact. Policies issued or delivered in Virginia must still include an endorsement or provisions undertaking to pay the insured all sums legally entitled to recover from the owner or operator of an uninsured motor vehicle, within limits no less than those required by Section 46.2-472, and not exceeding the liability insurance limits provided by the policy unless any one named insured rejects the additional uninsured motorist insurance coverage. UIM coverage limits must still equal the uninsured motorist coverage limits, and coverage is to be paid without any credit for available bodily injury and property damage coverage available for payment, unless any one named insured has signed an election to reduce underinsured motorist coverage payments by the available bodily injury liability or property damage liability coverage. The priority of payment structure for persons entitled to coverage under more than one policy also remains unchanged, running from the policy covering the vehicle occupied at the time of the accident, to the policy covering a vehicle not involved in the accident under which the injured person is a named insured, to the policy under which the injured person is an insured other than a named insured.
House Bill 107 has been enrolled and approved as part of Virginia's 2026 legislative session and is final as enacted law.
