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New Virginia Law Requires Insurer to Notify Represented Claimant About Payment of Settlement

August 5, 2020

With the passing of Senate Bill 984, Virginia lawmakers have created an entirely new statute revolving around settlement notice requirements.  Virginia Code § 38.2-236 will take effect on July 1, 2013.  Upon issuing any settlement check for $5,000 or more to an attorney or other representative in payment for a third party claim arising out of an insurance policy, an insurance company must notify the claimant within five business days after the date the payment was sent.  The notice must be sent to the claimant’s physical or email address that has been provided by the claimant to the insurance company, unless the claimant has notified the insurance company in writing that he waives notice of payment.  A copy of the notice shall be sent simultaneously to the attorney or representative of the claimant or judgment creditor.

The insurance company must send the notice only after a settlement has been agreed to by the attorney or representative of the claimant, and must contain ONLY the following language:

“Pursuant to § 38.2-236 of the Code of Virginia, you are hereby notified that a payment was sent on (insert date on which payment was sent) by (insert name of insurer) to your attorney or other representative (insert name, address, and telephone number of attorney or other representative known to insurer), in satisfaction of your claim or judgment against (insert name of insurer, or insured, whichever is appropriate).

If you have any questions, please contact your attorney or other representative.”

The new statute expressly states that a violation of the statute does not create a cause of action for money damages for a person who failed to receive the notice.  Similarly, it states that the failure to provide proper notice under the section does not invalidate or affect the settlement.

Finally, the statute clearly states that the insurer’s communication with a represented claimant is strictly limited to the notice under the statute and in no way allows the insurer to otherwise communicate with a claimant who is represented by an attorney without the written consent of the attorney.

It appears that this statute has been created only to ensure that a claimant is fully informed about the existence of a settlement and the payment of proceeds for that settlement.