Written by Delia DeBlass, Esq.
Edited by Bill Pfund, Esq.
Property damage claims can be made by filing a separate Warrant in Debt or by including the claim in the same action for personal injury. There is also a VA Code Section that states that “insurers shall arbitrate and settle all disputed claims made for automobile physical damage between them in accordance with the terms of the Nationwide Intercompany Arbitration Agreement.” (See Va. Code §38.2-2231(A)).
This Code Section, however, has been deemed unconstitutional by a number of Circuit court decisions in Virginia. In 1999, the Circuit Court of Danville, Virginia first ruled on this issue. In Bass v. Young, the Court noted that it had “serious concerns about the constitutionality of Va. Code §38.2-2231” as it did away with the right to a jury trial and provided no appeal or judicial review of an arbitrator’s decision. (See Bass v. Young, 49 Va. Cir. 525 (1996)).
The Circuit Court in Rockbridge County also agreed that this Code Section is unconstitutional. (See Virginia Mut. Ins. Co. v. Dean, 49 Va. Cir. 132 (1999)). In Virginia Mutual Insurance Company v. Dean, the Plaintiff insurance carrier, acting as subrogee of the insured, filed a property damage claim against the operator of another insured automobile. The Defendant filed a plea in bar, asserting that pursuant to §38.2-2231, arbitration was the exclusive remedy. The Court denied the Defendant’s plea in bar and set the matter for trial, finding that the remedy provided by the Legislature was to be “in addition to and not in lieu of the ancient common law right of trial by jury.”
Most recently, the Court in Virginia Mutual Insurance Company v. Burgess continued to hold that the Code Section is unconstitutional. (See Virginia Mut. Ins. Co. v. Burgess, 51 Va. Cir. 269 (2000)). In this case, Virginia Mutual was again subrogree to the insured and filed a property damage claim. Defendant argued that Plaintiff did not have a right to sue for damages under §38.2-2231.
The Court held that this Code Section was unconstitutional, noting that it denies corporations the constitutional right to a jury and appellate review, stating that: “[t]he guarantee to the corporate parties of the right to sue in the courts of this Commonwealth, of the right to a trial by jury and of the right to the appeal of an adverse decision is preserved and guaranteed to them in Article I, § 11, and in Article VI, § 1, of the Virginia Constitution.”
As of now, the Virginia Supreme Court has not ruled on this issue. Therefore, it is possible for an insurer to reject a demand for arbitration. In addition, Code Section 38.22-2231 provides that “if any such insurer is unable to furnish proof of its membership in such agreement, an action may be asserted in a court of competent jurisdiction.” (See Va. Code 38.2-2231(B)).
But why would an insurer want to reject a demand for arbitration? Depending on the case, it can be advantageous to force a claimant to file a separate suit for property damage. For example, litigation allows for the ability to obtain additional information or discovery that could be used in the injury case. Further, litigation provides judicial review and access to the appellate process, which can be invaluable.