CHAPTER 199

An Act to amend and reenact § 38.1-881, as amended, of the Code of
Virginia, relating to certain provisions of policies of liability insurance
on motor vehicles and watercraft.

[H 724]

Approved March 138, 1968

Be it enacted by the General Assembly of Virginia:
1. That § 38.1-381 as amended of the Code of Virginia be amended and
reenacted as follows:

§ 38.1-381. Liability insurance on motor vehicles and watercraft:
standard provisions, “omnibus clause.”—(a) No policy or contract of bodily
injury liability insurance, or of property damage liability insurance, cover-
ing liability arising from the ownership, maintenance or use of any motor
vehicle or any private pleasure vessel, ship, boat or other watercraft, shall
be issued or delivered in this State to the owner of such vehicle or such
watercraft, or shall be issued or delivered by any insurer licensed in this
State upon any motor vehicle or any private pleasure vessel, ship, boat or
other watercraft then principally garaged or docked or principally used in
this State, unless it contains a provision insuring the named insured and
any other person responsible for the use of or using the motor vehicle or
private pleasure vessel, ship, boat or other watercraft with the consent,
expressed or implied, of the named insured, against liability for death or
injury sustained, or loss or damage occasioned within the coverage of the
policy or contract as a result of negligence in the operation or use of such
vehicle or such watercraft by the named insured or by any such person;
provided, that every automobile liability insurance policy or contract, or
endorsement thereto, insuring private passenger automobiles principally
garaged and/or used in Virginia, and every policy of liability insurance,
contract or endorsement thereto insuring private pleasure vessels, ships,
boats or other watercraft principally docked or used in Virginia, when
the named insured is an individual or husband and wife, which includes,
with respect to any liability insurance provided by the policy, contract or
endorsement for use of a nonowned automobile or private pleasure water-
craft, any provision requiring permission or consent of the owner of such
automobile or such watercraft in order that such insurance apply shall be
construed to include permission or consent of the custodian in such pro-
vision requiring permission or consent of the owner.

_ (al) Nor shall any such policy or contract relating to ownership,
maintenance or use of a motor vehicle be so issued or delivered unless it
contains an endorsement or provision insuring the named insured and ahy
other person responsible for the use of or using the motor vehicle with the
consent, expressed or implied, of the named insured, against liability for
death or injury sustained, or loss or damage occasioned within the coverage
of the policy or contract as a result of negligence in the operation or use
of such vehicle by the named insured or by any such person, notwithstand-
ing the failure or refusal of the named insured or such other person to co-
operate with the insurer under the terms of the policy; provided, however,
that if such failure or refusal prejudices the insurer in the defense of an
action for damages arising from the operation or use of such motor
vehicle, then this endorsement or provision shall be void.

(a2) Any endorsement, provision or rider attached to, or included
In, any such policy of insurance which purports or seeks in any way
to limit or reduce in any respect the coverage afforded by the provisions
required therein by this section shall be wholly void.

(a8) Such policy or contract of bodily injury liability insurance, or
of property damage liability insurance, which provides insurance to a
named insured against liability arising from the ownership, maintenance
or use of any motor vehicle in the business of selling, repairing, servicing,
storing or parking motor vehicles may contain a provision that the insur-
ance coverage applicable to such motor vehicles afforded a person other
than the named insured and his employees in the course of their employ-
ment shall not be applicable if there is any other valid and collectible insur-
ance applicable to the same loss covering such person under a policy with
limits at least equal to the financial responsibility requirements specified in
§ 46.1-504 of the Code of Virginia.

In the event that such other valid and collectible insurance has limits
less than the financial responsibility requirements specified in § 46.1-504
of the Code of Virginia, then the coverage afforded a person other than the
named insured and his employees in the course of their employment shall
be applicable to whatever extent may be necessary to equal the financial
responsibility requirements specified in § 46.1-504 of the Code of Virginia.

(b) Nor shall any such policy or contract relating to ownership,
maintenance or use of a motor vehicle be so issued or delivered unless it
contains an endorsement or provisions undertaking to pay the insured all
sums which he shall be legally entitled to recover as damages from the
owner or operator of an uninsured motor vehicle, within limits which
shall be no less than the requirements of § 46.1-1 (8), as amended from time
to time, of the Code herein; provided, however, that said insured, after
January one, nineteen hundred sixty-seven, shall be offered the opportunity
to contract, at an additional premium, for limits higher than those pro-
vided in § 46.1-1 (8) so long as such limits do not exceed the limits of the
automobile liability coverage provided by such policy. Such endorsement
or provisions shall also provide for no less than five thousand dollars
coverage for injury to or destruction of the property of the insured in
any one accident but may provide an exclusion of the first two hundred
dollars of such loss or damage.

(c) As used in this section, the term “bodily injury’ shall include
death resulting therefrom; the term “insured” as used in subsections
(b), (d), (f), and (g) hereof, means the named insured and, while resident
of the same household, the spouse of any such named insured, and relatives
of either, while in a motor vehicle or otherwise, and any person who uses,
with the consent, expressed or implied, of the named insured, the motor
vehicle to which the policy applies and a guest in such motor vehicle to
which the policy applies or the personal representative of any of the above;
and the term “uninsured motor vehicle’ means a motor vehicle as to which
there is no (i) bodily injury liability insurance and property damage lia-
bility insurance both in the amounts specified by § 46.1-1 (8), as amended
from time to time, or (ii) there is such insurance but the insurance com-
pany writing the same denies coverage thereunder for any reason whatso-
ever including failure or refusal of the insured to cooperate with such
company, (iii) there is no bond or deposit of money or securities in lieu
of such bodily injury and property damage liability insurance and (iv) the
owner of such motor vehicle has not qualified as a self-insurer under the
provisions of § 46.1-395. A motor vehicle shall be deemed to be uninsured
if the owner or operator thereof be unknown; provided that recovery under
the qnonesement or provisions shall be subject to the conditions hereinafter
set forth.

(d) Ifthe owner or operator of any motor vehicle which causes bodily
injury or property damage to the insured be unknown, the insured or some-
one on his behalf, in order for the insured to recover under the endorsement,
shall report the accident as required by § 46.1-400, unless such insured is
reasonably unable to do so, in which event the insured shall make such
report as soon as reasonably practicable under the circumstances.

(e) If the owner or operator of any vehicle causing injury or
damages be unknown, an action may be instituted against the unknown
defendant as “John Doe” and service of process may be made by delivery
of a copy of the motion for judgment or other pleadings to the clerk of the
court in which the action is brought and service upon the insurance com-
pany issuing the policy shall be made as prescribed by law as though such
insurance company were a party defendant. The insurance company shall
have the right to file pleadings and take other action allowable by law in
the name of John Doe.

(e) (1) Any insured intending to rely on the coverage required
by paragraph (b) of this section shall, if any action is instituted against
the owner or operator of an uninsured motor vehicle, serve a copy of the
process upon the insurance company issuing the policy in the manner pre-
scribed by law, as though such insurance company were a party defendant;
such company shall thereafter have the right to file pleadings and take
other action allowable by law in the name of the owner or operator
of the uninsured motor vehicle or in its own name; provided, however,
that nothing in this paragraph shall prevent such owner or operator from
employing counsel of his own choice and taking any action in his own
interest in connection with such proceeding.

This subsection shall not apply to any cause of action arising prior to
April twenty-seventh, nineteen hundred fifty-nine.

(f) Any insurer paying a claim under the endorsement or provisions
required by paragraph (b) of this section shall be subrogated to the rights
of the insured to whom such claim was paid against the person causing
such injury, death or damage to the extent that payment was made;
provided that the bringing of an action against the unknown owner or
operator as John Doe or the conclusion of such an action shall not con-
stitute a bar to the insured, if the identity of the owner or operator who
caused the injury or damages complained of becomes known, from bring-
ing an action again the owner or operator theretofore proceeded against
as John Doe, provided that any recovery against such owner or operator
shall be paid to the insurance company to the extent that such insurance
company paid the named insured in the action brought against such owner
or operator as John Doe, except that such insurance company shall pay
its proportionate part of any reasonable costs and expense incurred in
connection therewith including reasonable attorney’s fees. Nothing in an
endorsement or provisions made under this paragraph nor any other
provision of law shall operate to prevent the joining in an action against
John Doe of the owner or operator of the motor vehicle causing such injury
as a party defendant and such joinder is hereby specifically authorized.

(gz) No such endorsement or provisions shall contain any provision
requiring arbitration of any claim arising under such endorsement or pro-
visions, nor may anything be required of the insured except the establish-
ment of legal liability, nor shall the insured be restricted or prevented in
any manner from employing legal counsel] or instituting legal proceedings.

(h) The provisions of paragraphs (a) and (b) of this section shall
not apply to any policy of insurance to the extent that it covers the liability
of an employer under any workmen’s compensation law, but no provision
or application of this section shall be construed to limit the liability of
the insurance company, insuring motor vehicles, to an employee or other
insured under this section who is injured by an uninsured motor vehicle.