Top 5 Things-to-Know About Notifying Claimants of Settlement Payments


As many insurers are already aware, Virginia law now requires insurers to notify claimants and judgment creditors of all full and partial settlements over $5,000.  The law applies to all lines of insurance except those subject to Code § 38.2-4214 and 38.2-4319 and applies to both first and third party claims.  In an effort to ensure receipt of notice and avoid improper communication with claimants who are represented by counsel, Va. Code § 38.2-236 provides strict rules on how notice is given.  Below are the Top 5 Things-to-Know before notifying your claimants about settlement payments:

1. Notice is only required when a settlement check is made out directly to the claimant or made out jointly to the claimant and legal representative.  Also, the law requires insurers to simultaneously notify the claimant or judgment creditor’s attorney or legal representative of the payment. 

2. Make sure that notice is sent within five business days after the date payment is made or sent to the attorney or other representative or judgment creditor.  Notice must be sent to the physical address, or email or other electronic address, furnished by the claimant or judgment creditor to the insurance company.  Insurers are excepted from notifying claimants if notice has been waived in writing.   

3. Most importantly, the notice shall 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.

4. Although insurers are encouraged to comply strictly with Va. Code § 38.2-236, failure to abide strictly with the statute does not create a private right of action for damages, or a defense to such action.  Also, failure to abide strictly with the statute does not invalidate or in any way affect the settlement or satisfaction for which the payment was made by the insurer.

5. We recommend that insurers notify claimants directly and do not delegate this task to outside counsel.  Attorneys are encouraged to draft form letters for clients to ensure they are satisfying their obligations under the statute. 

 If you have any questions or comments about any of the requirements under Va. Code § 38.2-236 do not hestiate to contaact me or any of the attorneys at Sands Anderson PC.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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