Tuesday, May 19, 2009

Why can’t you just sue the insurance company in car accident cases?

Have you ever wondered why a wife would sue her husband for injuries sustained in a car accident? How about a mother suing her adult child for accident related injuries? Isn’t insurance supposed to cover such losses? Why not name Farmers, State Farm, Allstate, Progressive etc… as the defendant?

Generally speaking, insurance is not to be mentioned at trial, or even considered by a jury. That means the lawsuit must name the person who purchased the insurance or is covered under the policy (the insured) as the defendant and not the insurance company. This is true even though in the majority of cases the insurance company ultimately pays.

Most attorneys are only interested in going after the insurance policy and do not want to go after an insured directly. The reason is that individuals usually do not have adequate assets to cover the damages. However, when the insurance company doesn’t want to settle or makes low ball offers, it is necessary to litigate the case in the hopes of getting a fair award from the jury. If a case is filed, the person suing must name the actual person who caused the harm (i.e. Wife v. Husband).

Who pays the jury verdict?

In most cases, the insurance company pays the entire verdict. In a small number of cases there may be an "excess verdict." This means that the insured’s policy was insufficient to cover the damages. When that happens the insured is on the hook for any amount the insurance company does not pick up.

How can I avoid an excess judgment?

The first thing you can do is raise your insurance limits. Minimum insurance coverage is inadequate and can leave you responsible for an excess verdict.

The minimum insurance requirement in Oregon is $25,000 per person per accident and $50,000 per accident maximum. A couple of days in the hospital or a minor surgery can be extremely costly and minimum policy limits will not be enough to cover such expenses.

I recommend to my friends and family that they carry a minimum of $100,000/$300,000 in liability insurance. Adequate insurance helps to protect you if you are being sued. Moreover, you can make a claim against your own insurance company, up to the amount of liability insurance you purchased, if the at-fault driver has no insurance or has less insurance coverage than you. These claims are called uninsured motorists claims and underinsured motorist claims. I’ll write more on these topics later.

-Arne Cherkoss