Auto Insurance: Civil Lawsuit Protection

If you are being sued in a civil claim, you may be wondering if your insurance can cover the costs. The short answer is yes, auto insurance can cover civil lawsuits, but this depends on the type of insurance policy and the circumstances of the accident. Most auto insurance policies include personal liability coverage, which provides financial protection for the policyholder if they cause harm to someone else or their property while driving. This type of insurance can help cover legal expenses if the policyholder is sued. However, there are exceptions and limitations to this coverage. For example, if the policyholder fails to notify the insurance company about the accident within the specified timeframe or if the damages exceed the policy's coverage limit, the insurance company may not be obligated to provide legal protection. It is important to carefully review your insurance policy to understand the specific coverage and limitations.

No-fault insurance doesn't cover vehicle damage

No-fault insurance is a system in which drivers involved in accidents rely on their own insurance coverage to pay for accident-related losses, regardless of who is at fault. This type of insurance is mandatory in around a dozen US states, while a handful of others follow a "hybrid" or "choice" system, where claimants can opt out.

No-fault insurance covers medical expenses related to injuries sustained in a car accident, lost income (up to a certain limit), the cost of replacement services, and funeral costs. However, it's important to note that no-fault insurance does not cover vehicle damage claims.

In the event of vehicle damage, drivers typically rely on their collision coverage to cover the costs of repairs or replacements. This type of coverage is often referred to as "Physical Damage Coverage" and includes both Collision Coverage and Comprehensive Coverage. Collision Coverage protects against damage caused by a collision with another vehicle, a fixed object, or an object lying in the roadway, as well as damage caused by the upset of the vehicle. On the other hand, Comprehensive Coverage protects against theft, vandalism, damage caused by animals or falling objects, glass breakage, fire, wind, hail, and flood damage.

It's worth noting that no-fault insurance also has limitations when it comes to compensation for pain and suffering. While it streamlines the claims process and provides quicker payments, it does not include compensation for non-economic effects of the accident.

In no-fault states, drivers may sue for additional compensation in certain circumstances

No-fault laws are in place to prevent litigation and remove the question of which party is responsible for an incident. In no-fault states, drivers are required to carry insurance so that their costs are covered in the event of a car accident. The insurance company will pay compensation to any victims of accidents based on the insurance coverage that the driver has in place.

However, in certain circumstances, drivers may sue for additional compensation. No-fault states have laws that allow plaintiffs to file for additional compensation from the liable party if their injuries and monetary losses from the accident are not fully covered by the insurance payout. These circumstances almost always require the help of an experienced attorney.

Most no-fault states have a monetary threshold that allows victims to sue if their medical bills and expenses meet or exceed a certain amount (typically around $1,000). Victims can only meet this threshold from expenses actually accrued, meaning future or uncertain expenses cannot be counted towards it. Most monetary threshold laws also state that the counted medical expenses must be reasonable and necessary. In a lot of cases, a medical bill is not enough to prove that the treatment was reasonable, and a doctor or medical professional must testify that the treatment was a direct result of the accident.

Additionally, victims of serious injury have the right to sue in most no-fault states. Death is always considered a serious injury, and survivors can file a lawsuit to cover costs like funeral expenses. Most no-fault states have a list of what they consider to be serious injuries, which may include fractures, permanent "disability," permanent or "significant" disfigurement, and dismemberment.

You can be sued for a car accident even if you have insurance

Yes, you can be sued for a car accident even if you have insurance. There are several reasons why you might be sued, even if you have insurance coverage.

Firstly, insurance is not complete protection against being sued for a car accident. Certain circumstances can leave you open to liability, such as failing to report the accident or if the other party suffered serious injuries. If you didn't report the accident to your insurance company, they may no longer be obligated to defend you or cover the accident. Additionally, if the damages from the accident exceed your policy limits, your insurance company may pay the policy limit, leaving you open to a lawsuit for the remainder of the damages.

Secondly, disputes over liability or the value of injuries can also lead to a lawsuit. If your insurance company and the claimant disagree about who is at fault or the value of the claimant's injuries, litigation may be necessary to resolve these issues.

Thirdly, if the statute of limitations is approaching and there is insufficient time to negotiate a settlement, the claimant may choose to file a lawsuit to preserve their claim.

Finally, if you have assets, such as a home, boat, or available funds, you could be sued even if your insurance company is willing to pay the claimant. In this case, the claimant's attorney may investigate your financial situation to determine if you have assets that can be used to compensate the claimant fully.

It's important to note that your insurance company will typically provide you with an attorney to defend your case if you are sued, but there may be exceptions to this obligation. For example, if you failed to report the accident within the required time frame or if the accident was caused by an intentional act.

Insurance companies aren't obligated to pay for a lawyer in certain situations

Failure to Notify the Insurer

If you, as the insured, fail to notify the insurance company about the accident within the specific time limit set by the insurance policy, the insurance company may not be obligated to defend you. However, there are exceptions to this rule. For instance, if you were seriously injured and hospitalised or were physically/mentally incapable of notifying the insurer, these would be considered extenuating circumstances, and your failure to notify the insurer promptly may be excused.

Intentional Act Causing the Accident

Automobile insurance policies generally cover acts of negligence rather than intentional actions that cause car accidents. If you are accused of causing a car accident on purpose, your insurance company will likely refuse to cover the accident and will not provide a lawyer to defend you in any resulting lawsuit. For example, some insurance companies argue that drunk driving is an intentional act, and thus, if you are involved in a drunk driving accident, your insurer may refuse coverage for any claims arising from the crash.

Accident Damages Exceed Policy Limitations

Once the insurer has paid out damages up to the coverage limit of your insurance policy, they are generally no longer under any obligation to the insured. However, it is important to note that the legal duties of insurance companies in this situation may vary from state to state.

Insurance companies will try to settle for an amount within policy coverage

If you are being sued in a civil lawsuit, it is important to understand whether your insurance policy will cover the costs. While insurance can provide financial protection, it is not complete protection against being sued. Certain circumstances, such as failing to report the accident or having insufficient coverage, can still leave you open to liability. Your insurance company will try to settle for an amount within your policy coverage.

In the event of a car accident, your auto insurance policy can provide financial protection. Most standard auto insurance policies include personal liability coverage, which covers medical expenses and property damage for those involved in the accident, excluding you. However, if your coverage is insufficient to pay for the other party's injuries and losses, you can still be pursued for compensation. In such cases, the insurance company will aim to settle within the limits of your policy.

Similarly, homeowners' insurance provides personal liability coverage for unintentional harm or damage caused to others. This typically includes financial protection against lawsuits, legal fees, and injury claims. However, it is important to note that there are exclusions, such as intentional damage or property damage resulting from acts of war.

When facing a civil lawsuit, it is crucial to review your insurance policies to determine if they provide coverage. Insurance companies generally prefer to settle out of court to avoid the expense and risk of a large court judgment. They will assess your claim and try to settle for an amount that falls within the limits of your policy.

To ensure a favourable outcome, it is recommended to hire a lawyer who can help you navigate the complex process of negotiating with insurance companies. A lawyer can assist in gathering evidence, taking witness statements, and maximising your compensation. They can also guide you in dealing with insurance adjusters, who may try to minimise your settlement amount.

Frequently asked questions