People who have been harmed due to someone else’s careless conduct often know they have a right to be compensated for their injuries. But, the source of that compensation can be unclear to those who have not had such a claim before.
For instance, take a motor vehicle collision between two vehicles without passengers.Both drivers have automobile insurance, and one driver is at fault and the other driver is injured. In this example, the injured driver has a legal right to recover compensation from the at fault driver. The injured driver’s “claim” can include medical bills, lost wages, pain, suffering, inconvenience, and mental anguish. Absent insurance, the at fault driver would be personally financially responsible for the injured driver’s claim.
In Virginia, vehicle owners are supposed to insure their vehicles for at least $25,000 to cover bodily injury claims or pay an uninsured motorist fee to the DMV. Most drivers choose to insure their vehicles. The driver’s insurance company becomes responsible to pay any valid claims made against that driver, those named on the insurance policy, or in many cases, against those driving the insured vehicle. The insurance company has a contract requiring it to pay valid claims up to the limit of the available insurance coverage and to provide a lawyer for the at fault driver if a lawsuit arises. Going back to the motor vehicle collision example, the injured driver has a claim against the at fault driver personally for the harms caused. However, when the at fault driver is covered by motor vehicle insurance, the insurance company becomes financially responsible for the claim up to the limit of insurance available on the policy. This allows the injured driver to open a claim with the at fault driver’s insurance company to obtain compensation.
Frequently, the at fault driver only has limited insurance coverage or no coverage at all. An injured driver may present a claim for substantial medical bills and lost wages, not to mention pain and suffering, and come to find out that there is only $25,000 in available insurance. In such a case, an injured driver can turn to his own insurance company for compensation if his own insurance policy has more coverage than the at fault driver’s policy. This is called underinsured or uninsured motorist coverage. The injured driver’s own insurance company would then analyze the claim from the perspective of the at fault driver, asserting any available defenses.
It is important to point out that an insurance company is only obligated under its insurance contract to pay claims for which a driver covered by the contract becomes “legally responsible.” This means that just because there is insurance available to cover a collision or slip and fall or other occurrence does not necessarily mean that the insurance company has to pay the claim. Using our example, technically, before the insurance company is required to pay a claim, the injured driver must obtain a court judgment against the at fault driver in order to make the at fault driver legally responsible for the damages caused in the collision. In order to obtain a judgment, the injured driver must file a lawsuit naming the at fault driver as the defendant. The injured driver would have to prove to a judge or jury at a trial that the defendant was at fault for the collision and that the injuries were the result of the collision. Such a lawsuit is filed against the at fault driver personally and is not filed against any insurance companies. As I noted above, the insurance company is responsible for hiring a lawyer to defend the insured driver in the lawsuit and the insurance company will use its attorneys to vigorously defend lawsuits to reduce the amount the company may have to pay on a verdict. If an injured driver is seeking underinsured motorist coverage through his own insurance policy, then that insurance company would be entitled to hire additional attorneys to defend a case.
You might then ask, why should the insurance company pay my claim without a trial if the insurance contract says it only pays claims for which its insured drivers become legally responsible? There are numerous incentives for insurance companies to resolve claims without lawsuits or trials. Often, an insurance company will decide that it can settle a claim with a claimant for reasonable amount in order to reduce the risk of paying substantially more if there is a large verdict at trial. Additionally, insurance companies owe a duty to their insured drivers to settle cases within the limits of the available insurance coverage where it appears likely that a verdict at trial will exceed the amount of available insurance. A verdict that is larger than the amount of insurance available becomes the personal responsibility of the at fault driver to pay. Insurance companies are legally required to avoid that result if possible.
This is a very basic overview of the relationships between the players involved in a personal injury claim. The situation is made ever more complicated by additional injured claimants, multiple defendants, additional layers of insurance coverage, and other unique circumstances. The take away here is that a personal injury claim is against the actual person or company who caused the injury. One or more insurance companies may be responsible to pay a claim and may need to hire attorneys to defend a claim, but the insurance companies will not technically be defendants in a legal case filed by the injured claimant.