Underinsured Motorist Coverage And Stacking of Coverages
A few years ago, the Virginia legislature passed a new law to improve motor vehicle insurance coverage. The new law targets underinsured motorist coverage for all Virginia motorists. It took effect July 1, 2023, and affects auto insurance policies issued or renewed in Virginia after this date. See Va. Code § 38.2-2202(C). Prior to the new law’s effective date, Marks & Harrison previously published a blog post on this topic. See https://www.marksandharrison.com/blog/dont-be-tricked-changes-invirginia-insurance-law-took-effect-on-july-1-2023/. But this issue is so important that we thought it was worth addressing again now, especially since all current policies are now affected by the new law.
First, some background is useful to understand this change in the law.
When you purchase auto insurance in Virginia, you are automatically purchasing two types of coverage: liability coverage and uninsured/underinsured motorist coverage (UM/UIM). If you negligently cause injury while driving your liability coverage pays, up to the limits of the coverage, the amount you owe to the injured person for their injuries. Thus, your liability coverage benefits other persons who are injured when you are at fault for causing a wreck. Your UM/UIM coverage benefits you if you are injured due to another’s negligent use of a vehicle.
The uninsured motorist (UM) provisions provide coverage (up to the coverage limits) when the tortfeasor has no liability coverage. See Va. Code §38.2-2206(B). The underinsured motorist (UIM) provisions provide additional coverage (up to the coverage limits) when the tortfeasor has liability coverage but it is not enough to fully compensate you for your injuries. See id.
Under the old law, for policies issued before July 1, 2023, you could only recover under your UIM policies if and to the extent that the total UIM coverage available exceeded the liability coverage available. Stated otherwise, the UIM carrier got a “credit” or “off set” in the amount of the tortfeasor’s liability coverage.
For example: While driving, Allison negligently hits Bob. Allison has $100,000 in liability coverage. Bob has $100,000 in UIM coverage. Because Allison’s liability coverage equals Bob’s UIM coverage, Bob’s UIM coverage is effectively nullified; Bob cannot “stack” the two policies and collect under both. So in this case, Bob only has a total of $100,000 of available insurance coverage to compensate him for his injuries. Bob would not recover any UM/UIM benefits under his own policy; only Allison’s liability coverage would be exposed. But under the new law, for policies issued on and after July 1, 2023, there is no longer a “credit” or “offset” for the amount of the liability coverage. See Va. Code § 38.2-2206(A). This means you can recover under your UIM policy in addition to the liability coverage regardless of whether the total UIM exceeds the liability coverage. So in the above-stated example, Bob would have total insurance coverage of $200,000 available ($100,000 from Allison’s liability policy + $100,000 from Bob’s UIM policy). So the net effect of the new law is that Bob’s coverage doubled (a 100% increase!) from the old law.
As demonstrated above, this change in the law is beneficial to injured persons because it provides more (often a lot more) insurance coverage if they are injured due to the negligent operation of a motor vehicle. The change is automatic – meaning, unless you affirmatively opt out, you will have this benefit under any policy issued in Virginia on and after July 1, 2023. Insurance carriers are required to notify you of this change and any election to opt out must be in writing. See Va. Code § 38.2-2206(A) & §38.2-2202(C). We recommend that automobile insurance policy holders should not opt out of the provisions of the new law regarding UM/UIM coverage.
However, insurance companies may try to encourage insureds to opt out (so as to minimize their potential exposure in a crash) by explaining that insureds can lower their premiums by opting out of this new coverage. While technically true, such an assertion is not the full story. Frequently, the amount that the premium would drop is probably minimal and thus not worth giving up the enhanced benefits of the new law. Typically, for just a few dollars more in premiums you can substantially increase your auto insurance coverage. An honest cost benefit analysis of your situation will likely dictate that you should take advantage of the new UIM stacking law.
So before you agree to anything or sign paperwork from your insurance carrier, consider your car insurance needs and financial situation carefully. And do not let the insurance carriers trick you into saving a few pennies in premiums in exchange for giving up many thousands of dollars in insurance coverage.
The entire Marks & Harrison Fall 2025 Points of Law newsletter is available for download
