How is liability insurance overage paid for?

April 26, 2005 5:27 PM

I was in a car accident about four years ago where I rear-ended another vehicle. AFAIK, it was my fault, but no one seemed injured at the time, and now I'm being sued for thousands more than my liability auto insurance will cover. If they are awarded what they're asking through arbitration or through a judgement, what are my options for paying the portion which my insurance won't cover? Background and other related questions inside.

I only have liability insurance. $25,000 per person, $50,000 per incident, I believe. The folks I hit, while not obviously injured at the time, are wanting quite a bit more than that for medical treatment and pain and sufferring, loss of sexual pleasure, etc, etc.

The suit kind of snuck up on me. In fact, it was two months from expiring due to the statute of limitations when my insurance company called to let me know that they'd been unable to make any recent contact with the lawyer representing them, and that I should expect a process server to show up and serve me so as to halt the event from expiring. That happened just a few weeks later.

I've only talked briefly with my insurance company's lawyer and I'm giving my deposition tomorrow. There's an arbitration hearing set for next month. If that doesn't resolve anything, there's a court date scheduled for next year. If they don't settle for under $50K, I presume I'm on the hook for the rest. In that case, what are my options for paying that off? Anyone go through something like this and have some advice or at least a story to let me know what to expect? Thanks.

posted by xiojason to Work & Money (12 answers total)

Obviously, this depends on the state you're in, but your insurance company is [probably] obliged to provide a defense for you in the lawsuit, and to settle within policy limits if possible. That's what the plaintiffs are probably hoping for, too; a judgment against a person (instead of an insurance company) can be a hassle to collect. In any event, I don't believe you can be forced to settle for more than your policy limits at arbitration, and if you lose in court and the award exceeds your insurance, the plaintiffs will have to try to collect the rest from you.

If you have significant assets (house, savings, etc.) then you may want to consult with your own lawyer (i.e. one who works for you only, and not for the insurance company.) You may want to do that even if you don't have significant assets, just to get an independent opinion on what's likely to happen, and what's the worst case.

In California, at least, insurance companies and their lawyers have been quite successful at beating down plaintiffs' claims for general damages (e.g. pain & suffering, loss of consortium, and so forth). Often, they'll pay all the medical and car repair bills, leaving the plaintiff to go into court with nothing more than "my neck hurt for like a week! Plus I had nightmares!" The insurance company will portray the plaintiffs as whiners who are out to get something for nothing, and if the plaintiffs' injuries were not horrific, or the plaintiffs are not especially likable, the tactic often succeeds.

Good luck.
posted by spacewrench at 6:19 PM on April 26, 2005

Loss of sexual pleasure? Oh please! These are jokers, I would not worry that much. Their goal is to extract as much as possible from your insurer. They probably have a flunky lawyer to boot. Your insurer is obligated to provide you with a defense lawyer, and this in many respects is the most important aspect of insurance. Your lawyer will likely not be Perry Mason, but will probably be better than the other side's given what you have described. (When million dollar judgements are on the line the opposite is often true). You will have to see how things start to play out, but I would not worry too much if I were you, unless you have a net worth over a few hundred thousand (in which case you are an idiot for having such low coverage limits) or some other reason for them to seek your assets. This sounds like a nuisance case to me - they don't have a good claim, but hope to settle for something based mostly on the threat of litigation which is expensive for the insurer.
posted by caddis at 6:44 PM on April 26, 2005

In my case this drug out all the way to the day of court before the plaintiff settled. It is my understanding that the plaintiff believed his best offer would come as a final offer before court. It takes a special type of person to go through with something like this. It was a constant nagging misery for the 3 years I had to deal with my insurance company's lawyers and paperwork.

An open question I have from the whole event is if I would have benefitted from my own lawyer. In some ways I felt like I was without representation. The plaintiff had a lawyer, the insurance company had someone looking out for their best outcome, but I didn't have someone personally making sure I made the right decisions. I don't know if I was being paranoid, but my insurance company didn't communicate any more information than absolutely necessary.
posted by joelr at 6:59 PM on April 26, 2005

Same type of thing happened to me in 2001 - I accidentally ran a stop light, and hit another car. No major injuries at the time, but surprise! One month before the statute of limitations ran out two years later, I got a big lawsuit in the mail for $40K..

Just hand it off to your insurance company and they'll take care of it. In my case, the other party ended up settling for less than 1/4th of what they'd sued for, about a year and a half later.
posted by mrbill at 7:18 PM on April 26, 2005

the insurance company had someone looking out for their best outcome, but I didn't have someone personally making sure I made the right decisions

The insurance company hires you a lawyer. This lawyer is your lawyer. His or her duty is to protect your interest, not the insurance company's interest. This is part of their professional responsibilities and failure on their part could cost them their license. Despite this, they do get picked and hired by the insurance company. They are in a tough spot, keep them honest to you and you should be fine.
posted by caddis at 7:21 PM on April 26, 2005

IANAL, but I'm pretty sure that's what people have un- and underinsured motorist coverage for. If they were to win, and get a judgement for more than your coverage, I think their underinsured coverage kicks in and covers the rest. You know, or something like that? Me-Fites, attack!
posted by joshuaconner at 8:07 PM on April 26, 2005

xiojason, that's wretched. ("Sucks donkey dicks," in my hometown parlance.)

But stressful as it is -- and confirming upthread responses -- there's no reason to think you're on the hook for anything at all. People who file last-minute claims essentially are trying to cash in a lottery ticket. They're looking for a payoff, which means deep pockets, which you do not have. And they know it.

You say, "AFAIK, it was my fault" -- so I'm assuming there was no ticket issued, which means no major vehicle damage and no visible injuries. Make your depostion and go to the arbitration session. Judging from my experience (and that of friends in similar situations), it won't go further. Your insurance rates will go up -- but you knew that.

Remember, you haven't done anything wrong. This wretchedly sucky situation is exactly why you've been paying insurance premiums, so let them earn it.
posted by vetiver at 8:12 PM on April 26, 2005

I wouldn't worry too much about it. The way I understand that it works is like this. We want money, we sue the responsible party's insurance company for the maximum amount they are covered for. Maybe we sue for a little more too just to show them we mean business. We know the actual guy at fault either doesn't have any real assets or will simply declare bankruptcy and we wont get anything more than the insurance total so we don't even waste our time going after that seriously.

Talk to a lawyer if you'd like but the insurance company has more to loose than you do so they're going to fight it hard.
posted by pwb503 at 9:37 PM on April 26, 2005

I only have liability insurance. $25,000 per person, $50,000 per incident, I believe.

OMG.

I carry $2 million liability, and sometimes wonder if that's enough.
posted by five fresh fish at 10:32 AM on April 27, 2005

Reading this thread is making me nervous. (I'm married to xiojason, so I have a stake in this too.) Yikes.

Guess we might have to have a talk about our insurance soon.

Oh, BTW, he did get a ticket at the scene of the accident.
posted by litlnemo at 11:47 AM on April 27, 2005

fivefresh - depending on the state that 25/50 can be damned expensive. I carried that much when I lived in Florida. When I moved to Virginia I upped it to 100/300... and pay 55% of what I used to.

Remember, coverage levels shouldn't be based exclusively on what they could run up to, they should also take into consideration the most they would be able to ever get from you. If you're likely judgement-proof for the rest of your life there's little sense in protecting 2M of your income.
posted by phearlez at 11:57 AM on April 27, 2005

I am writing as a lawyer and as someone who was in a similar situation prior to become a lawyer. The awfulness of the situation made never want to have anything to do with lawyers in my life, ironically, so I feel for you.

Some basic things to keep in mind, echoing some things already mentioned: lawyers that take these cases for plaintiffs typically suck-- you can safely infer as much from your lawyer telling you he was having trouble getting in touch with the plaintiff's lawyer. If the plaintiff had a decent case, they wouldn't have waited so long to file, and their lawyer would be acting more professionally. The arbitration your're going to is likely mandated by the state-- many states have mandatory arbitration to keep these often frivolous suits from tying up the courts. A lot can happen at the arbitration, i.e., the ridiculousness of the suit, and the ineptitude of the plaintiff's atty, can be quickly revealed to the arbitrators. This is exactly what happened in my situation, and the arbitrators (a panel of three lawyers) ruled in my favor (ie, found I was not guilty and didn't owe a dime) about a month after arbitration. Don't be too concerned that you have a trial date-- trial dates are set and canceled routinely, and something like only 10% of all lawsuits (not just of this type) ever go to trial.

Finally, assuming you had a decent insurance company, your insurance company's lawyer is probably decent as well. Remember YOU are the client, and ask the atty as many questions as you want to to feel comfortable with the situation. This is part of what you're paying for when you have insurance.

You don't mention what the plaintiff is asking for, but it's always some crazy amount like 2 million dollars. That's the part that scared the hell out of me when I got the summons, and like you, I instantly started worry about how I was ever going to pay a judgment against me. My advice: this is a scenario way too far in the future to be overly freaked out about right now. The most revealing part of your post is that "no one seemed hurt at the time." That is a red flag screaming "frivoulous lawsuit," and your atty, the arbitrators, and even plaintiff's atty are all well aware of that.

The thing I wish I had realized from the beginning when I was sued, and can hopefully convince you of, is that, while there may be slightly differing versions of what happened at the scene, some things are obvious, ie, people died, or they didn't die, people got hurt or they didn't get hurt, cars got totaled or they just got bent up a little. These things become obvious to everyone involved soon enough, and cases that don't deserve to be litigated through trial usually aren't.
posted by Harvey Birdman at 3:32 PM on April 27, 2005 [1 favorite]