Motor Vehicle Civil Action Amendments

3
31A-22-323
0
Motor Vehicle Civil Action Amendments
2026 GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Calvin R. Musselman
House Sponsor: Anthony E. Loubet
LONG TITLE
General Description:
This bill amends the Insurance Code to establish requirements relating to policy-limit
demands and disclosures in third-party liability claims related to motor vehicle liability.
Highlighted Provisions:
This bill:
establishes requirements for the content of policy-limit demand letters from a claimant to
a liability insurance carrier;
establishes requirements for correspondence from a claimant or a claimant's legal counsel
to an unrepresented insured;
requires a liability insurance carrier to provide written disclosure to the insured regarding
defense and indemnification;
addresses the effect of a disclosure and the consequences of noncompliance; and
preserves existing rights and remedies.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
ENACTS:
31A-22-323
, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section
31A-22-323
is enacted to read:
31A-22-323
. Policy-limit demands, correspondence, and disclosure requirements
-- Third-party liability claims.
(1)
(a)
In a third-party liability claim arising under this part in which a claimant or
claimant's legal counsel sends a demand letter to a liability insurance carrier
demanding the insured's liability policy limits in exchange for a release of claims,
such a demand letter shall:
(i)
include reasonably sufficient information to allow a reasonable liability insurance
carrier to evaluate the claim, including a description of the incident, injuries,
liability basis, and damages, copies of the medical records and bills supporting
claimed medical damages, and information supporting any other elements of
claimed economic damages; and
(ii)
provide the liability insurance carrier with no less than 30 days to accept or reject
the policy-limit demand.
(b)
A claimant is not required to provide expert reports or attorney work product as part
of the demand letter described in Subsection
(1)(a)
.
(2)
(a)
If the liability insurance carrier that receives a claimant's demand letter described
in Subsection
(1)
declines to tender the insured's liability policy limits following the
receipt of the demand letter, and the claimant intends to file a cause of action against
the insured, and the claimant or claimant's legal counsel elects to correspond directly
with an unrepresented insured, the correspondence with the insured shall:
(i)
be in writing, with a copy of the correspondence delivered to the applicable
liability insurance carrier;
(ii)
include:
(A)
a reference to this statutory section;
(B)
a plain-language explanation of the claimant's claims against the insured;
(C)
a description of the claimant's related injuries;
(D)
a copy of the demand letter described in Subsection
(1)
that was sent to the
liability insurance carrier; and
(E)
if applicable, a copy of the liability insurance carrier's written response to the
demand letter described in Subsection
(1)
;
(iii)
comply with the Rules of Professional Conduct established by the Utah Supreme
Court, including an indication that the interests of the claimant and the claimant's
legal counsel are adverse to the insured; and
(iv)
indicate the legal action the claimant and claimant's legal counsel intend to
pursue against the insured.
(b)
Unless necessary to preserve the claimant's legal rights, a claimant or the claimant's
legal counsel may not file a cause of action against the insured until 45 days after that
date on which the insured has received the correspondence described in Subsection
(2)(a)
.
(c)
If a claimant intends to pursue damages in the legal action described in Subsection
(2)(a)
that exceed the applicable liability insurance policy limit, the correspondence
described in Subsection
(2)(a)
:
(i)
shall identify the insured's right:
(A)
to review the entirety of the claimant's demand letter, claimed medical records
and expenses, and other supporting documentation with the claimant's liability
insurance carrier; and
(B)
to discuss the insured's rights and responsibilities with respect to any excess
verdict, judgment, settlement, or award with the insured's liability insurance
carrier, as well as with independent legal counsel; and
(ii)
if the correspondence references or suggests the possibility of placing a judgment
lien against personal property of the insured following any judgment, shall include
a plain-language explanation of the process for obtaining a judgment lien.
(3)
(a)
Within 30 days after the date on which the liability insurance carrier receives a
copy of the correspondence described in Subsection
(2)
, the liability insurance carrier
shall provide the insured with a written disclosure stating whether the liability
insurance carrier agrees:
(i)
to defend the insured against the claim; and
(ii)
to indemnify the insured for any verdict, judgment, settlement, or award arising
from the claim, including whether:
(A)
the indemnification is limited to the applicable policy limits; or
(B)
the indemnification will extend to a verdict, judgment, settlement, or award in
excess of the applicable policy limit.
(b)
If the liability insurance carrier's decision to indemnify the insured is limited to the
applicable policy limits, the disclosure in Subsection
(3)(a)
shall:
(i)
provide a reasonable explanation as to the basis of the decision; and
(ii)
notify the insured of the insured's right to seek independent legal counsel
regarding the insured's rights and responsibilities with respect to the decision
whether to indemnify the insured.
(4)
(a)
A disclosure made under Subsection
(3)
:
(i)
does not expand, reduce, or modify coverage under the insurance policy; and
(ii)
is intended solely to provide clarity to the insured regarding the liability insurance
carrier's position.
(b)
(i)
Compliance with the procedural provisions of this section does not preclude a
finding that the liability insurance carrier breached the liability insurance carrier's
duty of good faith if the liability insurance carrier's substantive decisions
regarding settlement, defense, or indemnification were unreasonable under the
circumstances.
(ii)
The reasonableness of a liability insurance carrier's conduct with regard to the
decision to defend and indemnify the insured as described in Subsection
(3)
shall
be evaluated based on all relevant circumstances existing at the time decisions
were made.
(5)
Nothing in this section alters, limits, or waives:
(a)
a liability insurance carrier's duty to act in good faith and deal fairly with the liability
insurance carrier's insured;
(b)
any rights or remedies available to an insured arising from a liability insurance
carrier's failure to accept a reasonable settlement offer within applicable policy limits;
or
(c)
any defenses, claims, or causes of action available under common law or statute to
any party.
(6)
(a)
A claimant's failure to comply with Subsection
(1)
or (2) does not bar the claimant
from filing suit against the insured or pursuing any remedies available at law, but
may be considered by a court in evaluating whether a settlement demand was
reasonable for purposes of determining whether a liability insurance carrier breached
the liability insurance carrier's duty of good faith.
(b)
A liability insurance carrier's failure to comply with the disclosure requirements of
Subsection
(3)
does not create an independent cause of action, but may be considered
as evidence of bad faith in any subsequent action by the insured against the liability
insurance carrier.
(c)
Nothing in this section may be construed to create additional procedural prerequisites
to an insured's right to pursue a bad faith claim against the liability insurance carrier.
(d)
This section supplements and does not replace existing common law and statutory
duties and remedies relating to a liability insurance carrier's duty of good faith and
fair dealing with the liability insurance carrier's insured.
(e)
Nothing in this section creates a private cause of action.
Section 2.
Effective Date.
This bill takes effect on
May 6, 2026
.
3-12-26 9:58 AM