CHAPTER 721

An Act to amend and reenact § 38.1-381, as amended, of the Code of
Virginia, relating to liability insurance on motor vehicles and water-

craft.
[S 372]
Approved April 5, 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 insur-
ance, covering 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 prin-
cipally 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 cover-
age 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 ves-
sels, 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 watercraft, 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 provision 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 any
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 cover-
age 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, notwith-
standing the failure or refusal of the named insured or such other person
to cooperate 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.

(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 oppor-
tunity to contract, at an additional premium, for limits higher than those
provided 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 endorse-
ment 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 liability 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 company writing the same denies coverage thereunder for any
reason whatsoever including failure or refusal of the insured to cooperate
with such company, (iil). 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 endorsement or provisions shall be subject to the con-
ditions hereinafter set forth.

(d) If the owner or operator of any motor vehicle which causes
1266 Acts OF ASSEMBLY [vA., 1968

bodily injury or property damage to the insured be unknown, the insured
or someone 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 circum-
stances.

(e) If the owner or operator of any vehicle causing injury or dam-
ages be unknown, an action may be instituted against the unknown de-
fendant 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
prescribed by law, as though such insurance company were a party defend-
ant; 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 em-
ploying 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 and such person’s insurer, notwith-
standing that it may deny coverage for any reason, to the extent that pay-
ment 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 constitute a bar to the insured, if the identity of the owner
or operator who caused the injury or damages complained of becomes
known, from bringing an action against the owner or operator theretofore
proceeded against as John Doe, or such person’s insurer denying coverage
for any reason; provided that any recovery against such owner or oper-
ator, or insurer as heretofore referred, shall be paid to the insurance com-
pany 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 rea-
sonable 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 oper-
ator of the motor vehicle causing such injury as a party defendant and
such joinder is hereby specifically authorized.

(zg) 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.