Do Insurance Companies Commonly Sue to Recover Damages?

In My Humble Opinion
1

…from insured individuals?

Over a year after my auto accident, I received a check from my insurance company refunding my deductible. There was no question of the other driver’s fault, but she didn’t seem well-off and carried the legal minimum of liability coverage, far short of replacing my expensive truck. Since it was just an inattentive mistake and covered by my underinsured motorist portion, I decided to just go on and not worry about it, even though there was significant cost to me.

My agent did mention something about trying to get my deductible back, so I assume the legal system is the reason for the year long delay (claim was closed early last year).

So I’m curious if insurance companies routinely take “at fault” drivers to court to recover their expenses after paying their customers? Is this normal when the policy doesn’t cover the amount of damages? I assume that if her liability had covered everything this wouldn’t have happened. (FTR: her car was totaled as well)

Bonus question: I never heard from any attorneys following the accident. When I had a wreck a few decades ago, I got quite a few phone calls offering to represent me. Does anyone know why this changed? Judging from the frequent attorney ads on local TV, I had assumed they’d be aware of these incidents and I would hear from them.

IMHO since there may not be a precise, factual answer.

2

I assume that what happened is that your insurance company paid for your repairs under your collision coverage. In that case, your company will attempt to get back what they paid plus your deductible from her company - her liability coverage will cover your deductible as long as it is within the policy limits although it might take time for the insurance companies to agree on the amount. If she didn’t have enough insurance to cover your damages, chances are she wasn’t wealthy enough for your insurance company to bother suing her. If your damages are $40K there’s little chance that she would have only $10K worth of insurance while also having the ability to pay you the other $30K

3

Yes, they do attempt to recover under the Subrogation Clause found in most insurance policies. This allows them to seek recovery against the responsible party. You were fortunate in receiving your deductible as not all companies perform this service as they are under no obligation to do so.

4

Thanks for responses. I wasn’t aware that this was common. I guess I’d just assumed the insurance companies baked losses into the probability predictions and kept rates such that payouts kept them in the black. I didn’t realize they routinely went after underinsured drivers to recover. This is a good reason to buy liability coverage well in excess of the legal minimums (which we do).

Sorry didn’t respond yesterday. Eyes were dilated after Dr. visit and it was difficult to read.

5

Even if the other driver had only minimum liability limits, that’s enough to cover your deductible plus part of what your insurance company paid you under the collision insurance.

If the driver was poor, odds are your company accepted her policy limits, and didn’t chase after money from her. But if she had money and just chose not to carry enough insurance, yes, they will certainly sue her on your behalf.

Even if her policy covered everything, if she denied responsibility for the accident, (or her insurer did) your company might have had to go to court to prove it before they could recover from her insurance company.

6

Most of these issues are settled out of court because it saves time and money for both insurance companies. I’ve been chosen twice for civil suits and subsequently dismissed because the suits were settled at the last minute. In that vein, almost half the states have “No Fault Insurance” designed to avoid the whole process.

7

Do insurance companies make this determination? If so how? Based on credit rating, perhaps?

8

When I lived in Philadelphia (where many people have no insurance and everyone seems to be working a scam) I was rear-ended at a red light. I was hit hard enough to break my driver’s seat! The woman who hit me was insured, but furious that I wanted to turn the accident in to insurance. She said bumpers were called bumpers because they were made for bumping. I wedged a milk crate behind my seat so I could drive.

I took my car to a shop for an estimate. The guy was happy to meet me. He told me he knew my insurance company adjuster and that he’d “take care of me”.

I told him I was wondering about my $250 deductible, because (I thought) the car seat could be repaired for less than that. He ended up handing me $250 cash to show he was sure I’d be taken care of.

So, he fixed the seat and “straightened my frame” and “replaced various bumper parts”. I assume he shared his windfall with the adjuster.

When I picked up my car it was washed and waxed. I noticed that the part used to fix my seat was rusted, likely it was from a wrecking yard. A few weeks later I got a check in the mail from the woman’s insurance company for my deductible. I ended up with a $250 profit!

9

Honestly, if I were you, I’d rather know the body shop didn’t use substandard parts even if it meant the loss of a $250 profit.

10

It was a Toyota Tercel with many miles on it. The part just kept my seat from falling back. I was happy. Plus, this was Philadelphia.

11

In the UK car insurance is compulsory, although many people take the chance.

When I managed a fleet. it was standard policy to pursue costs from uninsured drivers in the courts. Even though many of them had no assets, it still put a marker (County Court Judgment) on their credit history that would come back to bite them later.

12

Technically, your insurance sues the other insurance, then they come to an agreement.

Let’s say your vehicle was an absolutely tricked-out truck with a number of custom add-ons, and the worth was $150,000; her policy had the minimum liability of $100,000. Let’s further say your truck was totalled. Your pay your deductible; your insurance pays you $149,500, then sues the other insurance to recoup the (at most) 100,000. Yes, they have someone on staff to look at the other person’s finances to see if it’s worth it for them to take them to court for the additional $50k. I believe (not positive here) that you are automatically part of that suit, and may get your 500 deductible back.

Now that pretty much every state has mandatory insurance, that’s out the window. You don’t (necessarily) need outside representation. The ads you see on TV are really searching for where the at-fault driver was working at the time, and at that point they’re less interested in the cost of repairs or replacement, and more interested in pain and suffering. It’s less suing the driver and more suing their employer, 'cause that’s where the money is.

13

It’s happened to me twice that I was in an accident that was the other driver’s fault, and they had insurance, but through a different company than mine. (fyi, no one was injured in either incident)

Both times I took my car to be repaired and paid a $250 deductible. My insurance company went through what I understand was some type of arbitration to recover what they paid and the deductible from the other drivers’ insurance. The first time it took about 3 months, the second time more than a year (my insurance said the other insurance dragged things out).

14

IANAL and I’ve never been in this situation, but it seems like if you are in an auto accident that involves injury, you should seek out a lawyer, in most cases.

The at-fault driver’s insurance is going to give you a low-ball payment for your pain and suffering and it’s in your interest to have someone help you with the negotation, or take it court.

15

It’s not complicated, but there are a few moving parts.

Person enters into a contract with Shifting Sands Mutual.
At minimum, the contract (policy) will provide coverage for bodily injury and property damage caused when an insured driver causes a covered, at-fault accident. The amount the policy will pay for such things is determined by the limits the Person chose when they bought the policy.

In addition to paying up to the limit of the coverage, the insurance company will also pay the attorney and court costs to defend the Person in the event of litigation.

If Bodily Injury claim exceeds the coverage limit, the insurance company does NOT just write the check and close the matter, leaving the Person to the tender mercies of the damaged party. Why? Because the only way for the damaged party to effectively get money out of Person is to sue them–which the insurer will have to pay to defend. Therefore, the damaged party signs a release of all claims against the Person, in exchange for the maximum payable under the policy. Bang, Person is now immune to being sued by the damaged party. It DOES sometimes happen that the damaged party elects to not settle, and instead proceeds with litigation. Unless the Person actually has large reserves of assets, however, this is usually a fool’s errand. There are exceptions to the above, but those are exceptions.

Similarly with property damage claims. The way that usually goes is, Person buys $10,000 in property damage coverage and then goes out and plows a Corvette. Not enough coverage. Corvette owner has three options. 1) Sue the Person and get the money (less the $10k available from Shifting Sands Mutual), which they will then have to collect (good luck with that); 2) take the $10k and be sad they weren’t fully compensated for their Corvette; 3) seek recovery from their own Collision coverage from their policy with Furthest Farthing Insurance, in which case they have to pay a deductible. So since the OP is asking about option 3, let’s see how that works.

Collision coverage pays you up to the actual cash value (what you’d get if you were to sell the car today, WITHOUT the collision damage) less your $500 (or whatever) deductible. So, for your $60,000 car, Furthest Farthing will pay $59,500 and take the car. Your insurance company doesn’t like being out that $59,500 so, thanks to the subrogation clause in your policy (I would be stunned to see a company that did not preserve its right to recover a loss) Furthest Farthing will go about looking for the money. If the at-fault party his minimal assets (they can run an asset search through public databases), they will take Shifting Sands’ $10,000 and be sad. But if the at-fault person has a hoard of sufficient volume of UNPROTECTED ASSETS, they might just go after them personally. Litigation is expensive, however, and that cost is considered when deciding whether to get happy, or just remain sad.

But at bottom, your insurance company will not just write a check for your policy max and bid you good day. Their covenant is to protect you as much as possible from what you’ve done. That means fighting as hard as they can to minimize your personal accountabilitiy for the damage you caused.