I was stopped at a red light and the car behind me didn’t. He caused minor damage totaling $950. I paid my deductible (which was $400) and my insurance company paid the difference. I have since received a check for $400 from MY insurance company for $400 (memo: deductible reimbursement) AND I have received a check from HIS insurance company for $500 (memo: Liability Buy Back). If I cash both checks, I will have made a profit of $500.
What do you think? Is this a matter of ethics and should I return the $500 check or is his insurance company paying me to release them from further liability?
You could try to give it back, but I’ll almost bet they won’t take it. I had the same thing happen a few years ago. Both companies told me it was more expensive for them to take it back.
Call up both the companies, explain the situation, and see what they tell you. It’s quite possible they’ll tell you that you’d be doing nothing wrong with keeping both checks. On the other hand, they might well tell you to send one back…but you’ll break even at the very least, and won’t you sleep easier knowing that the AAA thugs won’t be beating down your doorstep some night?
Read all documents accompanying the check from the injuring party’s insurance carrier.
There should be a letter or note on the back of the check that indicates something more descriptive and binding than “Liability Buy Back”.
I’d suggest you contact your insurance carrier’s claims department and ask if they’ve recovered all damages from the injuring party’s insurance carrier.
If they HAVE recovered all of their losses from the injuring party’s insurance carrier then I imagine the money is yours free and clear.
If they’re still waiting for full reimbursement then I imagine that check may belong to your insurance carrier, or at least your carrier may have the right to receive those funds from you.
Two bits of advice that I’m sure you don’t need:
If this accident was less than a few months back, you might want to be completely certain that your person is uninjured before cashing any checks or signing any documents absolving the other individual from further claims. It would really suck to find out you’ve got an injury that took a while to show up after you signed over your rights.
Until you are 1000% certain that no one has claims to that money due to mistakes, clerical errors or subrogation, keep the money in a savings account so you don’t accidentally spend it.
This happened to me a couple months back. You can expect a letter from your own insurance company’s adjustment deparment within a few months asking you for the overpayment when they try to collect from the other insurance company. In the mean time, put the money away in a safe place and collect some interest. I wouldn’t spend it unless you get something in writing from your insurance company that it’s your money to keep. But don’t count on it.
I don’t know what Liability Buy Back is, but if the accident was determined to be his fault, you probably don’t have to pay your deductible. If so, then I’m only getting that you have received $1,050 ($550 from your insurance co. for the difference between the deductible and the damages, and $500 from the other guy’s insurance).
I’m terrible at math, so am I adding something wrong?
$550 from his insurance (Diff. between deductible and repair cost)
$400 from his insurance (Reimbursement for deductible, not his fault)
$500 from other guy’s insurance (Liability Buy Back)
So, the $500 from the other guy’s insurance is purely money in the bank.
I googled it (“Liability Buy Back”, with quotes) and the first hit I got was to a Michigan state (you don’t say where you are) insurance glossary which has the following definition:
The $500 check from the other person’s company is an attempt to conclude at least some, if not all, of the possible legal ramifications of the accident. In other words, a settlement. They are attempting to cover all possible damages of some type other than those presented to them directly by your insurance company, which, after all, was only responsible for the $950 in damages to your car. If you cash it, undoubtedly they will assert that you agreed to their resolution of your outstanding legal claims against them.
Don’t do that unless you are certain you have no other claims you wish to make.
But the $400 was a reimbursement, not a payment. Sjmarks paid $400 and then got $400 returned so it’s a wash - as if it never happened. Then he got $550 from his own insurance and $500 from the other company. In fact, I think he should have gotten $950 from someone (the deductible doesn’t count since he’s not supposed to pay it and he got reimbursed already) - his own insurance, I imagine, who then gets the money from the other guy’s company since the other guy was at fault. (Where this “liability buy back” factors in, I don’t know.)
I shall feel very stupid if I am still adding this wrong. When I say I’m terrible at math, I really mean it!
His damage was $950. With the reimbursement (400) and the payment from his ins. co (550), that’s $950 right there, making the $500 from the other ins. company an amount above and beyond any costs he incurred.
Would it surprise anyone to learn I work in finance? Thank god for Excel. If I had to add anything up the old-fashioned way, the company would go under.
Why did the OP pay anything at all to their insurance carrier? They were stopped at a red light. Everyplace I’ve ever been nails 100% of the liability on the guy that runs into a car that’s sitting at a red light.
Many states have “no fault” insurance statues. “Fault” is eventually determined, but payment of claims does not initially depend on determination of fault. Each party’s insurance company pays thier own client’s claim, less deductables.
Then the insurance companies get togethor and decide who really was at fault. The not-at-fault driver’s entire claim is then refunded by the insurer of the at-fault driver. That driver’s deductable is refunded to them.
The advantage of this system is that the damage gets paid for and fixed immediatly regardless of how long the bickering over who’s fault it was takes. The driver not-at-fault loses only some interest on thier deductable.
The Original Poster didn’t pay ANYTHING to an insurance company. He paid $400 to the shop that repaired the vehicle. Without a determinatin of fault, that was his responsibility under the policy.
Once fault was determined (informally, between the insurance companies, based no doubt upon the investigating police officer’s report), the insurance company for the other person paid $950 to the insurance company of the Original Poster. That company then sent to their policy holder (the OP) $400, to reimburse him for the out-of-pocket expense of his deductible.
Ah, the part where it was said that they paid the deductible to the repair shop must have been in invisible ink.
The last time I was rear-ended, (just a minor pair of gouges from the other car’s license plate screws) I called my insurance company, and they sent out a roving adjuster who found my car in the parking lot and issued a check on the spot - I went from getting hit to paid off in about three hours’ time.
Another time I’d been rear-ended at a light, the damage was significant. (As in, I picked up the bumper and put it in the back seat) I drove my car to the repair shop, was given a loaner and three days later had my car back. Again, I paid nothing to anybody.
