Manu v. GEICO Casualty Co.

PRESENT: All the Justices

EBENEZER MANU
OPINION BY
v. Record No. 160852 JUSTICE S. BERNARD GOODWYN
April 27, 2017
GEICO CASUALTY COMPANY

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Daniel E. Ortiz, Judge

In this appeal, we consider whether the Circuit Court of Fairfax County erred in

sustaining a demurrer in a case in which the plaintiff alleged that an uninsured motorist (UM)

insurance carrier violated its duty of good faith to its insured, by refusing to pay its UM policy

limits prior to the insured obtaining a judgment against the uninsured tortfeasor.

BACKGROUND

Because this is an appeal from the circuit court’s decision to sustain a demurrer to a

complaint filed by the appellant, Ebenezer Manu (Manu), the facts are recounted as alleged in

that pleading. EMAC, L.L.C. v. County of Hanover, 291 Va. 13, 20, 781 S.E.2d 181, 185 (2016).

On October 30, 2010, Manu was a passenger in a vehicle driven by Benjamin Boateng

(Boateng) that was involved in a multi-vehicle automobile accident. Boateng had a personal

auto insurance policy with a $25,000 limit. Manu was insured by GEICO Casualty Company

(GEICO) under a personal auto insurance policy, which provided UM coverage with a $25,000

limit. On November 22, 2010, Manu notified GEICO of a potential UM claim.

Manu incurred $27,189.12 in medical bills and $6,375 in lost wages as a result of the

accident. On October 19, 2012, Manu sued Boateng and John Doe in the Circuit Court of

Fairfax County. Answers obtained in discovery from several drivers involved in the accident

purportedly established that a John Doe driver was the cause of the accident. On September 19,
2013, Manu submitted this information to GEICO and advised GEICO of his intent to seek the

$25,000 in UM coverage.

GEICO elected to defend John Doe. The trial against the defendants was scheduled for

February 9, 2015. On January 30, 2015, Manu offered to settle the case for $12,500 from

GEICO, and subsequently rejected GEICO’s counter-offer of $5,000. One week before the trial,

Manu settled the lawsuit against Boateng for Boateng’s liability policy limit of $25,000, and

proceeded to trial solely against John Doe.

During the trial against John Doe, the circuit court ruled that John Doe was negligent as a

matter of law and that his negligence was a proximate cause of the collision. The trial proceeded

on damages, and while GEICO did call a medical expert to testify, the expert did not contest

Manu’s medical bills or injuries. The jury returned a verdict of $68,528.24 in favor of Manu,

plus costs and prejudgment interest, and, on February 10, 2015, the court entered judgment

against John Doe for that amount.

On May 14, 2015, Manu filed a complaint against GEICO. Manu alleged that pursuant to

Code § 8.01-66.1, GEICO was “charged with the duty to evaluate, adjust, and settle [uninsured

motorist] claims against it in ‘good faith,’” and, “notwithstanding said duty, GEICO’s failure to

settle plaintiff’s claim within the $25,000 policy limit after plaintiff’s January 30, 2015 demand

violated Code § 8.01-66.1,” and constituted a breach of GEICO’s duty to act in good faith.

Manu sought judgment against GEICO in the amount of $18,528, “representing the amount of

the unpaid compensation damages awarded by the jury,” 1 plus unpaid prejudgment interest,

1
It is undisputed that GEICO promptly paid the limit of its UM policy after Manu
obtained judgment against John Doe.
2
reasonable attorneys’ fees of $30,000, and expenses, costs and double interest as provided under

Code § 8.01-66.1(D).

GEICO filed a demurrer. On July 24, 2015, the circuit court held a hearing on the

demurrer, and the presiding judge overruled GEICO’s demurrer.

Manu served discovery requests upon GEICO on August 20, 2015. He subsequently

filed a motion to compel when GEICO did not provide all the requested documents. GEICO

responded, in part, that Manu had no right to the documents because he had not satisfied the

statutory prerequisites of Code §§ 8.01-66.1 and 38.2-2206 in that, at the time of the alleged bad

faith, he had not obtained a judgment against John Doe. During a December 18, 2015 hearing on

this motion, the court deferred ruling on the motion and ordered additional briefing.

By letter dated January 28, 2016, the circuit court again deferred ruling on Manu’s

motion to compel, and invited GEICO to move for reconsideration of the prior decision

overruling GEICO’s demurrer. Following argument on February 26, 2016, the circuit court

granted GEICO’s motion to reconsider. It vacated the order overruling GEICO’s demurrer,

sustained GEICO’s demurrer with prejudice, denied Manu’s motion to compel as moot, and

dismissed Manu’s complaint with prejudice.

Manu appeals. His assignment of error asserts:

The Trial Court erred by sustaining GEICO Casualty Company’s
Demurrer to Mr. Manu’s Complaint which alleged a cause of action under
Virginia Code § 8.01-66.1(D)(1). Specifically, the Trial Court erred in ruling that
Virginia Code § 8.01-66.1(D)(1) did not provide Mr. Manu a remedy against
GEICO Casualty Company for its alleged bad faith conduct in adjusting his
uninsured motorist bodily injury claim.

3
 ANALYSIS

Manu argues that Code § 8.01-66.1(D)(1) imposes a duty of good faith upon a UM

carrier to evaluate, adjust and settle a demand by an insured for UM coverage, prior to the

insured’s obtaining judgment against the uninsured tortfeasor. GEICO responds, in part, that any

duty of good faith imposed by Code § 8.01-66.1(D)(1) arises concurrently with a UM carrier’s

obligation to pay its insured under the policy, and that the obligation to pay under a UM policy is

governed by Code § 38.2-2206, which does not obligate the insurer to make any payment to the

insured until after the insured obtains a judgment against the alleged uninsured tortfeasor.

This appeal addresses the interpretation and interaction of two statutes concerning the

duties of UM carriers in Virginia, Code § 38.2-2206 and Code § 8.01-66.1. “[A]n issue of

statutory interpretation is a pure question of law which we review de novo.” Conyers v. Martial

Arts World of Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174, 178 (2007).

The critical question regarding Manu’s assignment of error is whether either statute

imposes a duty on the part of UM carriers to adjust and settle an insured’s demand for payment

under a UM policy before the insured obtains judgment against the uninsured tortfeasor.

Accordingly, we first address a UM carrier’s obligations which arise pursuant to Code § 38.2-

2206. We then address whether and when Code § 8.01-66.1(D)(1) is triggered by the obligations

imposed upon a UM insurer under Code § 38.2-2206, and whether Code § 8.01-66.1(D)(1)

independently establishes any duty on the part of a UM carrier to adjust and settle UM claims

before trial.

I. Code § 38.2-2206 – Uninsured Motorist Insurance Coverage

Code § 38.2-2206, “Uninsured motorist insurance coverage,” requires insurance

companies to provide UM coverage, stating, in relevant part:

4
 A. . . . . [N]o policy or contract of bodily injury or property damage liability
insurance relating to the ownership, maintenance, or use of a motor vehicle shall
be issued or delivered in this Commonwealth to the owner of such vehicle or shall
be issued or delivered by any insurer licensed in this Commonwealth upon any
motor vehicle principally garaged or used in this Commonwealth unless it
contains an endorsement or provisions undertaking to pay the insured all sums
that he is legally entitled to recover as damages from the owner or operator of an
uninsured motor vehicle.
....

F. If any action is instituted against the owner or operator of an uninsured or
underinsured motor vehicle by any insured intending to rely on the uninsured or
underinsured coverage provision or endorsement of this policy under which the
insured is making a claim, then the insured shall serve a copy of the process upon
this insurer in the manner prescribed by law, as though the insurer were a party
defendant. . . . The insurer shall then have the right to file pleadings and take other
action allowable by law in the name of the owner or operator of the uninsured or
underinsured motor vehicle or in its own name.

(Emphasis added.) The parties agree that the instant UM policy comports with the requirements

of Code § 38.2-2206. They also agree that, among the other prerequisites, an insured must be

“legally entitled to recover” the damages he is seeking before a UM carrier’s obligation to pay

arises. However, they disagree as to the meaning of the phrase and the obligation it imposes

upon a UM carrier. Code § 38.2-2206 does not define the phrase or any of its parts. See Code

§ 38.2-2206(B).

“When the language of a statute is unambiguous, we are bound by the plain meaning of

that language. Furthermore, we must give effect to the legislature’s intention as expressed by the

language used unless a literal interpretation of the language would result in a manifest

absurdity.” Conyers, 273 Va. at 104, 639 S.E.2d at 178 (internal citations omitted). Thus, we

must examine the plain meaning of the words used by the legislature.

As noted above, a UM carrier must “pay the insured all sums that he is legally entitled to

recover as damages from the owner or operator of an uninsured motor vehicle for bodily injury

or property damage caused by the operation of an underinsured motor vehicle.” Code § 38.2-

5
2206(A) (emphasis added). To “entitle” means “to give a right or legal title to; qualify (one) for

something; furnish with the proper grounds for seeking or claiming something.” Webster’s

Third New International Dictionary 758 (1993); see also Black’s Law Dictionary 649 (10th ed.

2014) (defining “entitle” as “to grant a legal right to or qualify for,” and “entitlement” as “[a]n

absolute right to a (usually monetary) benefit, such as social security, granted immediately upon

meeting a legal requirement”). To “recover” means “to obtain (relief) by judgment or other legal

process; to obtain (a judgment) in one’s favor; to obtain damages or other relief; to succeed in a

lawsuit or legal proceeding.” Black’s at 1466. Generally, “damages” are “money claimed by, or

ordered to be paid to, a person as compensation for loss or injury.” Id. at 471 (citing Martin L.

Newell, A Treatise on the Law of Malicious Prosecution, False Imprisonment, and the Abuse of

Legal Process 491 (1892) (“The term defined: A sum of money adjudged to be paid by one

person to another as compensation for a loss sustained by the latter in consequence of an injury

committed by the former or a violation of some right.”) and Frank Graham, The Law of

Damages 1 (1936)). 2 A court renders its “final determination of the rights and obligations of

parties in a case” in its “judgment.” Black’s at 970. Thus, by the statute’s plain meaning, a UM

carrier has a duty to pay, to an insured, damages which an uninsured motor vehicle owner or

operator has been ordered by a court to pay the insured for bodily injury or property damage

caused by operation of an uninsured motor vehicle.

This Court has previously interpreted Code § 38.2-2206 and its predecessor statute, Code

§ 38.1-381, consistently with the statute’s plain language. In Willard v. Aetna Casualty & Surety

Co., 213 Va. 481, 482, 193 S.E.2d 776, 778 (1973), we stated that a UM carrier “would not be

2
While the general definition suggests that a claimed amount constitutes damages, the
sources relied upon indicate that damages are determined to be owed, not merely claimed.

6
subject to an action in contract on its uninsured motorist endorsement until judgment in tort had

been entered against the unknown defendant referred to as ‘John Doe.’” We have explained that,

“[u]nder the statute, the obligation of the uninsured motorist insurer arises only if it is determined

that the insured is ‘legally entitled to recover’ damages from the owner or operator of an

uninsured motor vehicle.” Midwest Mut. Ins. Co. v. Aetna Casualty & Surety Co., 216 Va. 926,

929, 193 S.E.2d 901, 904 (1976) (emphasis in original). “Judgment is the event which

determines legal entitlement to recovery.” Id. 3 Thus, Virginia precedent indicates that the duty

owed by a UM carrier to its insured is to pay its insured the damages he or she is “legally entitled

to recover,” and that a judgment against the uninsured tortfeasor is required to create a legal

entitlement to recover damages.

Manu claims that this Court, in the cases of Aetna Casualty & Surety Co. v. Dodson, 235

Va. 346, 367 S.E.2d 505 (1988), and Colonial Insurance Co. v. Rainey, 237 Va. 270, 377 S.E.2d

393 (1989), rejected or altered its previous holdings which stated that the phrase “legally entitled

to recover” requires an insured to obtain a judgment against the uninsured motorist in order for a

UM carrier to be obligated to pay. We disagree.

Dodson concerned whether the insured’s estate could recover under the UM provision of

his policy when he was killed in a work-related car accident and the exclusive remedy clause of

the Workers’ Compensation Act barred recovery against the employer/owner and co-

employee/operator in a tort action. 235 Va. at 348, 367 S.E.2d at 506. In holding that the estate

3
The fact that Midwest Mutual concerned a contribution action between two UM carriers
does not render its holding inapplicable to the case at bar, because the basis for the Court’s
determination that Midwest was not liable to Aetna was that neither carrier was liable to the
insured, as the insured had not obtained judgment against the tortfeasor. Midwest Mut., 216 Va.
at 927-29, 223 S.E.2d at 902-04.

7
could not recover under the UM policy, we stated that “[t]he phrase ‘legally entitled to recover as

damages’ interposes, as a condition precedent to the UM insurer’s obligation, the requirement

that the insured have a legally enforceable right to recover damages from the owner or operator

of an uninsured motor vehicle.” Id. at 350, 367 S.E.2d at 508. Further, in a footnote, we also

stated that Midwest Mutual’s “proposition that the insured is not ‘legally entitled to recover’

from an uninsured motorist until the insured’s claim against the tortfeasor is reduced to

judgment” was “inapposite.” Id. at 351 n.6, 367 S.E.2d at 508 n.6. Manu argues that this

language signaled a change in the Court’s prior rulings that a judgment was required for an

insured to be legally entitled to recover under its UM policy. Manu misconstrues the ruling in

Dodson.

The Court in Dodson did not reach the issue of legal entitlement to payment, because it

determined that the estate did not meet the threshold requirement of having a valid tort cause of

action against the uninsured owner/operator, which is necessary to bring any potential claim

within the scope of a UM policy. “Inapposite” means “not pertinent.” Webster’s at 1140.

Rather than being a repudiation of Midwest Mutual, the statement in Dodson that the holding in

Midwest Mutual was inapposite was a recognition that the issue before the Court in Midwest

Mutual—the point at which the insured was legally entitled to payment from the UM carrier—

was different from the issue in Dodson. The issue in Dodson was whether the Workers’

Compensation Act completely foreclosed the insured’s legal right to recover from the uninsured

motorist such that the insured did not even have a potential right to recover from the UM carrier.

Rainey also concerned the scope of coverage, analyzing whether the UM policy

requirement that “the injury or damage sustained must have been caused by accident and arise

out of the ownership, maintenance, or use of the uninsured motor vehicle” was met where the

8
alleged operator was 200 feet away from the vehicle at the time of the accident. 237 Va. at 273,

377 S.E.2d at 395. The parties stipulated that the other elements of the policy, which “mirrored”

Code § 38.2-2206, had been met, and asked the Court only to define the meaning of “operator”

within the context of that statute; the Court was not asked to decide whether the requirement of

legal entitlement to recover was satisfied. Id. Thus, not only is the holding in Rainey consistent

with the prior cases, but also, any statement in Rainey regarding what is sufficient for legal

entitlement to recover is dicta. See Virginia Ry. & Power Co. v. Dressler, 132 Va. 342, 350-51,

111 S.E. 243, 245-46 (1922) (“It is a maxim not to be disregarded, that general expressions, in

every opinion, are to be taken in connection with the case in which these expressions are used. If

they go beyond the case, they may be respected, but ought not to control the judgment in the

subsequent suit when the very point is involved for decision.”) (citation omitted).

Dodson and Rainey concerned whether an insured had a potential route to recover from

the uninsured owner/operator such that the insured could possibly be entitled to recover from the

UM carrier. In order for an insured to be eligible to recover from a UM carrier, he must first

meet the threshold requirement of having a legally enforceable right to recover from an

uninsured motorist. Indeed, Rainey cited Dodson for this proposition, noting that under Code

§ 38.2-2206,

the insured must be legally entitled to recover damages from the person identified
as the “operator.” See [Dodson, 235 Va. at 350-51, 367 S.E.2d at 508] (statutory
and uninsured motorist endorsement language “legally entitled to recover as
damages” held to be plain and unambiguous, and to interpose “as a condition
precedent to the UM insurer’s obligation, the requirement that the insured have a
legally enforceable right to recover damages from an owner or operator of an
uninsured motor vehicle”).

237 Va. at 274-75, 377 S.E.2d at 396 (emphasis added). This proposition is consistent with

Midwest Mutual. Neither this Court’s opinion in Dodson, 235 Va. at 348, 367 S.E.2d at 506, nor

9
its opinion in Rainey, 237 Va. at 275, 377 S.E.2d at 396, altered the clear holdings in Willard and

Midwest Mutual, because Dodson and Rainey concerned threshold determinations of whether the

insured came within the scope of the coverage of the UM policy and did not reach the issue of

whether the insured was actually entitled to payment.

Additionally, our subsequent case of State Farm Mutual Automobile Insurance Co. v.

Kelly, 238 Va. 192, 380 S.E.2d 654 (1989), put to rest any perception that Dodson or Rainey in

any way called into question whether judgment against the uninsured tortfeasor is a prerequisite

for a UM carrier having any obligation to pay its insured. In Kelly (decided three months after

Rainey), we explicitly reaffirmed our ruling in Midwest Mutual, stating that “[j]udgment is the

event which determines legal entitlement to recovery,” and held that a UM carrier’s liability

“could not arise prior to the time [the insured’s] right to recover was created—when the tort

liability of the uninsured motorist was legally established.” Kelly, 238 Va. at 195, 380 S.E.2d at

656.

In addition to obtaining a judgment against the uninsured tortfeasor, an insured who

intends to rely upon the coverage required by the UM statute must also serve a copy of process

upon the UM carrier. Code § 38.2-2206(F). See Midwest Mut., 216 Va. at 929-30, 223 S.E.2d at

904. This notice effectuates the UM carrier’s right to participate in the liability trial by filing

pleadings and taking other actions in the name of John Doe, but it does not impose a duty of any

kind upon the UM carrier to do so. Id. See Nationwide Mut. Ins. Co. v. Hylton, 260 Va. 56, 61,

530 S.E.2d 421, 423 (2000) (holding that a UM carrier is not a party to the liability case). This

right to defend the uninsured motorist, untethered from any obligation to its insured or the

motorist to participate in the liability trial, distinguishes UM carriers from liability carriers,

because while a “liability carrier has the duty to defend the insured and to exercise good faith to

10
settle meritorious claims within the policy limits,” that undertaking “is not required of the

uninsured motorist carrier.” United States Auto. Ass’n v. Nationwide Mut. Ins. Co., 218 Va. 861,

866, 241 S.E.2d 784, 787 (1978).

In sum, the phrase “legally entitled to recover damages” imposes as a condition precedent

to a UM carrier’s obligation to pay its insured, that the insured obtain a judgment against the

uninsured tortfeasor whose actions come within the purview of the UM policy. Of course, an

insured’s case is not even within the scope of UM policy coverage if the insured does not have a

valid cause of action against the uninsured tortfeasor or if that tortfeasor is an individual whose

actions do not come within the purview of the risk covered by the UM policy. Code § 38.2-2206

requires that a UM carrier be notified of potential claims, but it does not impose a duty upon a

UM carrier to participate in the tort liability trial against the uninsured tortfeasor or to defend,

adjust or settle a demand for payment under a UM policy prior to judgment being entered against

the uninsured tortfeasor.

II. Code § 8.01-66.1 – Remedy for arbitrary refusal of motor vehicle insurance claim

Manu asserts that Code § 8.01-66.1(D)(1) creates and imposes upon a UM carrier a duty

to attempt to adjust and settle a demand for UM coverage prior to the insured obtaining judgment

against an uninsured tortfeasor. GEICO asserts that Code § 8.01-66.1(D)(1) does not apply to

UM claims and is limited in its application to first-party insurance claims.

Code § 8.01-66.1 is entitled, “Remedy for arbitrary refusal of motor vehicle insurance

claim,” and under subsection D, it states

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 1. Whenever a court of proper jurisdiction finds that an insurance company
licensed in this Commonwealth to write insurance as defined in § 38.2-124 4
denies, refuses or fails to pay to its insured a claim of more than $3,500 in
excess of the deductible, if any, under the provisions of a policy of motor
vehicle insurance issued by such company to the insured and it is
subsequently found by the judge of a court of proper jurisdiction that such
denial, refusal or failure to pay was not made in good faith, the company
shall be liable to the insured in the amount otherwise due and payable under
the provisions of the insured’s policy of motor vehicle insurance, plus interest
on the amount due at double the rate provided in § 6.2-301 from the date that
the claim was submitted to the insurer or its authorized agent, together with
reasonable attorney’s fees and expenses.

(Emphases added.) 5

This provision recognizes as bad faith the “denial, refusal or failure to pay” “a claim”

under the provisions of a motor vehicle insurance policy as defined in Code § 38.2-124, which

incorporates by reference Code § 38.2-2206(A), the UM statute. UM policies are motor vehicle

insurance policies and Code § 8.01-66.1(D)(1) therefore applies to UM carriers.

A. Code § 8.01-66.1(D)(1) Did Not Create a Duty

Manu correctly notes that Code § 8.01-66.1(D)(1) provides a remedy against an insurer

for “bad faith conduct.” However, we must discern what constitutes bad faith regarding the

payment of an insurance claim in the context of Code § 8.01-66.1(D)(1).

4
Code § 38.2-124 states, in relevant part, that

A. “Motor vehicle insurance” means insurance against . . . . 2. Legal
liability of the insured, and liability arising under subsection A of § 38.2-2206 and
against loss, damage, or expense incident to a claim of such liability, arising out
of the death or injury of any person resulting from the ownership, maintenance or
use of motor vehicles.
5
Subsection (D) was added in 1991, and subsequently the statute has twice been
amended and reenacted to increase the value of the subject claim. See 1991 Acts ch. 155; 1997
Acts ch. 401; 2002 Acts ch. 631.

12
 A covenant of good faith is implied in insurance contracts, and imposes a burden on both

parties that neither will do anything in bad faith to injure the others’ rights under the agreement.

14 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d §§ 198:4; 198:9 (rev. ed. 2007);

see, e.g., Aetna Casualty & Surety Co. v. Price, 206 Va. 749, 761-62, 146 S.E.2d 220, 228

(1966) (adopting a bad faith, rather than negligence, rule regarding insurers’ conduct toward

their insureds). In this context, “bad faith” “connotes an action based on the insurer having

breached the implied covenant of good faith and fair dealing.” 14 Couch on Insurance 3d §

204:2; see also State Farm Mut. Auto. Ins. Co. v. Floyd, 235 Va. 136, 144, 366 S.E.2d 93, 98

(1988) (“Although not amounting to fraud in [the insurance] context, ‘bad faith’ runs counter to

the presumption that contracting parties have acted in good faith.”). “There are two common

elements in a bad faith claim: (1) the insurer’s contractual liability to pay under the policy; and

(2) the lack of a reasonable basis to deny or compromise the claim.” 6 New Appleman on

Insurance Law Library Edition, Motor Vehicle Insurance § 63.18[1] (Jeffery E. Thomas ed.,

2016) (emphasis added).

Code § 8.01-66.1(D) does not impose any additional conditions upon insurers; it provides

a remedy to insureds against insurers who arbitrarily refuse to pay claims they owe under the

terms of the insurance contract. See Code § 8.01-66.1(D)(1). Bad faith is failure to perform

one’s duty of good faith, and, in the insurance context, that duty flows from the obligations

created by the insurance contract. Therefore, there can be no bad faith by an insurer in declining

to perform an action the insurance contract does not require of it. See 14 Couch on Insurance 3d

§ 204:3 (observing that the essential question in determining bad faith is: “given the insurer’s

implied and express contractual duties . . . did the insurer act in a reasonable manner under the

circumstances?”).

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 First-party insurance pays directly to the insured. It is defined as “[a] policy that applies

to an insured . . . such as life insurance, health insurance, disability insurance, and fire

insurance.” Black’s at 922. UM coverage is characteristically similar to first-party insurance,

because it is paid directly to the insured for the loss suffered by that same insured.

A “claim” must be “[t]he assertion of an existing right.” Black’s at 301 (emphasis

added). See 6 New Appleman § 63.18[1]; see also 14 VAC § 5-400-20. 6 Thus, in the context of

Code § 8.01-66.1(D)(1), a request for payment is not a “claim” subject to a covenant of good

faith unless the insurer has a present contractual liability to pay it. In other words, a “claim” as

defined in Code § 8.01-66.1(D)(1) must arise out of the occurrence of the contingency or loss

covered by the insurance policy. The contingency or loss covered by a UM policy is payment to

the insured of all sums that he is legally entitled to recover as damages from the owner or

operator of an uninsured or underinsured vehicle. That contingency or loss does not occur until

the insured obtains judgment against the uninsured tortfeasor.

Rather than creating a new duty, Code § 8.01-66.1(D)(1) incorporates the duties already

established in the insurance policies it references and provides a remedy for the bad faith

violation of those contractual duties. As discussed above, an insured does not have “an existing

right” to payment from his UM carrier until he meets certain conditions: providing notice to the

carrier and obtaining judgment against the underinsured motorist. Code §§ 38.2-2206(E) and

6
“First Party Claimant” means “an individual . . . or other entity asserting a right of
payment under an insurance policy or insurance contract issued to such individual . . . or other
entity arising out of the occurrence of the contingency or loss covered by such policy or
contract.” 14 VAC § 5-400-20 (prescribing definitions pertaining to the rules governing unfair
claim settlement practices as promulgated by the Bureau of Insurance of the State Corporation
Commission).

14
(F). It follows that an insured does not have a UM “claim,” as that term is used in Code § 8.01-

66.1(D), until he obtains judgment, and further that there cannot be a bad faith denial of a

demand for payment under a UM policy before the demand ripens into a “claim.” 7

Code § 8.01-66.1(D)(1) applies to any insurance policy as defined in Code § 38.2-124,

not just UM policies. Code § 8.01-66.1(D)(1) uses the term “claim” as a trigger for the good

faith protection afforded as to all of the policies incorporated within the statute. Under most

first-party policies, an insured’s “claim”—existing, enforceable right to payment—arises prior to

and is not contingent upon obtaining a judgment. See, e.g., collision claims under Code § 38.2-

124(A)(1); medical payment claims under Code § 38.2-2206(A). However, as discussed above,

a UM “claim” is unique because, pursuant to the terms of UM policies, as required by Code

§ 38.2-2206, an insured is required to obtain a judgment against the uninsured tortfeasor before

the UM carrier is obligated to pay the insured on any such policy. Therefore, because there is no

valid UM claim until judgment is obtained, there is also no duty for a UM carrier to pay or settle

a demand for payment under the policy until judgment is obtained.

The statutory framework and legislative history confirm that UM carriers have no duty to

settle prior to trial. See Oraee v. Breeding, 270 Va. 488, 498, 621 S.E.2d 48, 52 (2005) (holding

that “we have a duty, whenever possible, to interpret the several parts of a statute as a consistent

and harmonious whole so as to effectuate the legislative goal. Generally, the Court will look to

the whole body of a statute to determine the true intention of each part.”) (internal quotation

7
We recognize that Black’s Law Dictionary also defines “claim” as “[a] demand for
money, property, or a legal remedy to which one asserts a right; esp. the part of a complaint in a
civil action specifying what relief the plaintiff asks for. Also termed claim for relief.” However,
it is clear from the foregoing discussion that the term “claim” within the context of first-party
insurance refers to an existing right. Under Code § 38.2-2206, an insured does not have a
“claim” against the UM carrier until he satisfies the contractual prerequisites for payment by the
insurer; a mere assertion or demand is not a “claim” in this context.
15
marks, alterations, and citations omitted). First, a UM insurer’s pretrial participation is

discretionary. Code §§ 38.2-2206(E) and (F); see also Nationwide v. Hylton, 260 Va. at 61, 530

S.E.2d at 423 (holding that a UM carrier’s right to file pleadings in and receive notice of the

liability trial does not create an obligation upon that carrier). It would be illogical for Code

§ 8.01-66.1(D)(1) to create a duty in UM carriers to settle at a stage in the proceeding where

Code § 38.2-2206 imposes no duty to participate. Rather, reading the statutes in harmony

indicates that the UM carrier’s decision to settle pretrial is similarly discretionary; a carrier may

settle prior to the insured obtaining judgment, but it has no duty to do so.

Second, Code § 8.01-66.1(D)(1) states that when an insurer is found to have acted in bad

faith, the insured is entitled to the amount due, and interest on that amount “from the date that the

claim was submitted to the insurer or its authorized agent, together with reasonable attorney’s

fees and expenses.” The fact that interest and costs are measured from the date of the claim

shows that the General Assembly intended the duty of good faith to arise when the insured is

presently owed under the terms of the policy. In a UM policy context, that does not occur when

the insured requests damages the insurer has no present obligation to pay, but rather when the

insured obtains judgment against the uninsured tortfeasor.

Third, neither the Virginia Unfair Trade Practices Act, Code § 38.2-500 et seq., nor the

statutory history of Code § 8.01-66.1(D)(1) indicates the existence of a pretrial duty of good faith

in the context of UM insurance, because each of those provisions addresses certain conduct by

carriers vis-a-vis “claims.” See, e.g., Code §§ 38.2-510(A) (6), (7), (14); Final Report of the

Joint Subcommittee Studying Motor Vehicle Insurance and Unisex Ratings, S. Doc. No. 29, at 5,

11-19 (1991). Additionally, although not conclusive, the failure of House Bill 1771 in 2015,

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which proposed adding a subsection E to Code § 8.01-66.1 specifically regarding UM claims,

suggests that UM claims are presently governed by the same statutes as other insurance claims,

as discussed above.

Finally, this interpretation of Code § 8.01-66.1(D)(1) is consistent with this Court’s

treatment of remedial statutes. See USAA Cas. Ins. Co. v. Alexander, 248 Va. 185, 194, 445

S.E.2d 145, 150 (1994) (holding that “the statute governing UM insurance was enacted for the

benefit of injured persons, is remedial in nature, and is liberally construed so that the purpose

intended may be accomplished”) (internal quotation marks, alteration, and citation omitted);

Board of Supervisors v. King Land Corp., 238 Va. 97, 103, 380 S.E.2d 895, 897 (1989)

(observing that under the “mischief rule,” “[e]very statute is to be read so as to promote the

ability of the enactment to remedy the mischief at which it is directed”) (internal quotation marks

and citations omitted). The wrong that Code § 8.01-66.1(D)(1) is intended to address is the

arbitrary refusal of insurance claims that an insurer has a present obligation to pay. Under Code

§ 38.2-2206, an insured is not entitled to payment from the UM carrier until she obtains

judgment. Thus, any burden of litigation costs in the liability trial which may be incurred by an

insured pursuing an uninsured tortfeasor is required by statute prior to a UM carrier becoming

obligated to pay its insured under the terms of the UM policy. It is not the product of a UM

carrier’s bad faith and requires no remedy under Code § 8.01-66.1(D)(1). 8

8
The unique nature of good faith as regards UM policies distinguishes this case from our
holding in Nationwide Mut. Ins. Co. v. St. John, 259 Va. 71, 75, 524 S.E.2d 649, 651 (2000). In
Nationwide, we observed that Code § 8.01-66.1(A) “punish[es] an insurer whose bad faith
dealings force an insured to incur the expense of litigation.” Id. Nationwide analyzed a different
subsection of Code § 8.01-66.1, subsection (A), which addresses medical payments. Unlike UM
claims, the duty to pay medical claims arise prior to entry of judgment, and thus the statute is
structured such that the insured should not have to bear the costs of litigation to obtain judgment.
However, because an insured is not entitled to payment from a UM policy until she obtains

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 B. Relief Afforded By Code § 8.01-66.1(D)(1)

That a duty of good faith arises in the context of UM policies only after a judgment has

been obtained does not render Code § 8.01-66.1(D)(1) meaningless. This statute creates a

remedy for an insurance company’s breach of contract in failing to pay amounts due under its

policies and, as regards most first-party automobile insurance claims, no judgment is required to

obligate the insurer to pay. In the UM context, a breach occurs when a UM carrier arbitrarily

refuses to pay once judgment has been obtained. See 14 Couch on Insurance 3d § 198:8

(“Because the covenant of good faith is an implied term of the contract, a breach of that covenant

entitles the non-breaching party to seek contractual remedies.”). In breach of contract actions,

the insured can recover, at most, the policy limit; not punitive damages or attorneys’ fees. See

Manss-Owens Co. v. H.S. Owens & Son, 129 Va. 183, 201, 105 S.E. 543, 549 (1921) (holding

that the damages recoverable for breach of contract are those which arise from the breach of the

contract itself). However, under Code § 8.01-66.1(D), an insured may recover not only the

amount due (the contract damages), but also double interest and attorneys’ fees and costs. Thus,

Code § 8.01-66.1(D)(1) creates an enhanced recovery for an insured in proper UM bad faith

actions.

CONCLUSION

In conclusion, we hold that Code § 8.01-66.1(D)(1) does not create a duty for UM

carriers to settle a case prior to trial, but rather creates a remedy for the conduct of UM carriers

that refuse in bad faith to pay once the insured has obtained judgment. Therefore, for the above-

judgment, the cost of litigation to obtain judgment against an uninsured tortfeasor is not an unjust
burden for which a remedy is required.

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stated reasons, Manu’s complaint failed to state a cognizable claim, and the circuit court did not

err in sustaining GEICO’s demurrer and dismissing Manu’s claim with prejudice. Accordingly,

we will affirm the judgment of the circuit court.

Affirmed.

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