H. B. 4435
(By Mr. Speaker, Mr. Kiss and Delegate Palumbo)
[Introduced February 6, 2006; 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
(W.Va. 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 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 a 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 an endorsement or provisions
undertaking to pay the insured all sums which he or she shall be
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 legally entitled to recover as damages
from the owner or operator of an uninsured motor vehicle up to an
amount of one hundred thousand dollars 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 three hundred thousand
dollars because of bodily injury to or death of two or more persons
in any one accident and in the amount of fifty thousand dollars 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 three hundred dollars 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 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 death resulting therefrom and the term "named insured"
shall mean the person named as such in the declarations of the
policy or contract and shall also include such person's spouse if
a resident of the same household and the term "insured" shall mean
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 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 at least
one applicable liability policy 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 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 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 the 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 claim was paid
against the person causing such 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 owner or operator shall be
paid to the insurance company to the extent that such the insurance
company shall have 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 may 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 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 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 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 the fifteenth day of January, one thousand
nine hundred eighty-three, and on or before the fifteenth day of
January 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. Recently, the Supreme Court
in the case of Horace Mann v. Adkins, 599 S.E.2d 720 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.