Is There a Limit to Liability When You're At Fault in an Accident?

Factual Questions
1

Way back in 2019, Tracy Morgan was involved in an auto accident while driving his Bugatti Veyron Grand Sport when he was sideswiped by a Honda CR-V. For those of you who might be unfamiliar with Bugatti, they’re a French automotive company that produces luxury sports cars for the ultra wealthy. Morgan’s Bugatti set him back almost $2,000,000. It was estimated that the minor damage to Morgan’s vehicle would cost approximately $50,000 to repair but it would cost him another $200,000 in vehicle depreciation because it was involved in an accident.

If I was at fault and totaled a Bugatti, how screwed am I or my insurance company? Are there any limits to liability when it comes to accidents?

2

it might depend on jurisdictions, with some having some limits.

But as a general matter, legally speaking the answer is no. The award has to have some rational connection to the damages suffered but other than that, the sky’s the limit.

Which also means that for the Bugatti driver (or even a prosaic Rolls Royce driver), they understand that as a practical matter, everyone around them is effectively uninsured, even if those folks have a strong policy by ordinary standards. Compared to the loss a Bugatti owner will face in a severe crash, even “good” car insurance is a drop in that bucket.

As a practical matter, his insurer will contact your insurer and after your policy limits are exhausted they’ll make a decision on whether pursuing you is likely to pay off or be an example of them beating a broke horse. You can’t get money out of a broke horse no matter how thoroughly you bloody them.

Lots of ordinary folks carry something called an “umbrella liability policy” that is additional liability insurance above & beyond their car or homeowner policies. The idea being that if I really did do the max-case stupid thing and run into a church bus full of photogenic blond girls and killed or crippled the all in some gruesome fashion, my existing insurance plus my umbrella would be enough to cover whatever the courts might ultimately award. I hope.

3

It won’t be enough. (most umbrella policies are $1M or $2M). But it will perhaps be enough for the plaintiffs to accept that there is no more and leave you alone. No one wants to chase you for the excess amount when you can go bankrupt and get out from under it. (unless you were drunk, in which case you can discharge the debt in bankruptcy. But you’ll still probably never pay it).

I agree.

4

Probably not. I’ve seen umbrella policies with limits as high as 5 million- but that’s still a limit.

The limit to liability is the damage you’ve caused. The insurance company only has to pay up to the policy limit and only certain assets can be seized to pay a judgement ( for example a home or retirement income might be exempt) - but there’s a difference between there not being a judgement and someone not being able to collect on it.

5

This scenario is the background to the closing scene in one of the Back to the Future films (I think the first one), where Marty (back in 1985) almost allows himself to be provoked into an illegal road race but decides not to, only to realise that if he had raced he’d have run into a Rolls-Royce.

6

Hmmm…now you’ve got me wondering what happens if I have a relatively minor accident with someone who just happens to be transporting a $10M piece of art in their car. Even if there’s only minor damage to the vehicle, no medical expenses, and I’m at fault, is there any principal or case law that says, “Hey! People shouldn’t be transporting $10M pieces of art like that and expect other parties to cover the damage, even if the other party is obviously at fault.”

7

I met with a moving company for a quote for a cross-country move. The guy emphasized not to pack anything corrosive or flammable. By way of illustration, he described a recent case of a guy who hired them to move his stuff, which wasn’t enough to fill a truck, so it was in between two other customers’ loads. The customer’s hobby was working on old cars and he had packed some solvents despite saying he wouldn’t do that. One bottle of something fell over, spilled onto the stuff below it, which reacted in such a way that a fire ensued. Everything in the trailer burned, including the very expensive goods belonging to the other customers. The moving company rep said that the total claim was over $600,000 (including the value of the trailer), for which that customer was completely responsible.

8

The principle would be contributory negligence. I’m not saying it would apply here, but I’m not saying it wouldn’t. It’s one of those doctrines where there’s a lot of room for the trial court to decide one way or the other.

9

In general I agree with your entire post, but an umbrella policy has limits just like any other. I have an umbrella policy for liability that has a limit of something like $2 million that’s good for auto or homeowner liability, but the limit is what it is. If I happen to cause $10 million worth of damage, the insurance company will fork over $2 million and as for the remaining $8 mil, their attitude would be “sucks to be you”. But one of the big advantages of having insurance, aside from the fact that it’s usually mandatory and always makes good sense, and notwithstanding its liability limits, is that your insurance company will go to bat for you over liability claims. The fact that they will unleash their carnivorous lawyers to defend you in court is sometimes more important than the liability coverage itself. In cases of major bodily injury claims that are suspected to be fraudulent, they’ll even hire private detectives to monitor the alleged victim.

And big liabilities are more common than one might think, especially for bodily injury, and especially in litigation-crazed America. But even here in Canada, I once knew a university professor who was facing millions in liability claims when he was deemed to be at fault in a swimming pool accident in which a kid was maimed for life.

10

Agree large losses are common. Disagree that America is “litigation-crazed.”

11

I know someone who was held liable for a car accident with very high costs because of bodily injuries. Once his auto and homeowner’s insurance was exhausted the plaintiff settled for that much. It still took a while for the plaintiff to decide the horse was all they way dead leaving a huge debt hanging over his head the whole time.

12

Seriously? Half the commercials on TV are personal injury lawyers advertising their services. Half the billboards are the same. Both my son and I have been sued in the past few years over “bumper kissing” incidents - low-speed, in parking lots, bumper-to-bumper, other car not moving. Both cases were for $75K-$100K in “injury” damages. Attorneys in both cases were notorious for their advertising. Both parties actually had to change attorneys to even less reputable ones after the original attorneys realized that State Farm was going to fight the cases. Both cases were dropped before seeing a courtroom.

Twenty years ago you kissed bumpers, took a quick look, and waved at each other. Now one party thinks they just won the lottery thanks to the fucking advertising.

13

I guess it depends on where you live. That hasn’t been my experience. Sounds like Vegas or maybe Florida.

14

The “accidents” were both in Pennsylvania. One in Philly, the other in the sticks (Pennsyltucky).

The advertising I see everywhere. If it’s not a pharma ad it’s probably a personal injury ad (I include the “have you or a loved one had mesothelioma” ads).

15

Really? I’ve seen those personal injury attorneys advertising extensively in Connecticut and wherever I travel to. It’s very, very common in the United States.

16

The attorneys in one of the cases I mentioned a few posts back actually asked what our coverage limits were. I refused to give the information - what my limits are have zero bearing on what your “damages” are.

17

Speaking as a former claims adjuster (now over a decade) there’s screwed and then there’s screwed.

First let’s talk about the carrier. They’re the least at risk in some ways, because they have clear contractual limits (leaving out No Fault states, and even then…). They’re going to pay out to the limit, and then they’re in the clear, absent some uncommon circumstances that I’m about to mention.

First - they open the floodgates by authorizing payments / settlements before assessing the loss. I’ve mentioned in previous threats about how dangerous state minimum coverage can be in several states, especially California, where the property damage coverage can be as low as five grand (!!!).

But if I as the adjuster on behalf of the carrier authorize payments, with such low limits, especially in multi-car or multiple owner (ask me about the 5 car, 4 building accident, no, wait, DON’T) losses, then I and the carrier are screwed. Because I have the obligation to pay out in a fair and complete manner to the limits of the coverage, but that means I need the total amount of damages so I can pay proportionally to all claimants. If I pay out three thousand to the poor old lady who lost her only way of transportation, but there’s still 7 people in line that the remaining 2 grand isn’t going to cover… again, screwed.

So in such circumstances, I would have had to say “I can’t pay anything out until ALL claims are submitted” which could take months to years. And that was not a fun conversation.

Secondly, and much more rarely, there’s the circumstance where there is possible negligence on the part of the insurer. I was a licensed P&C agent before I was an adjuster, and part of my job was to be on the record (recorded) in suggesting appropriate coverage to someone and NOT just quoting them state minimums no matter WHAT they asked. Because if I sell a homeowner state minimums without at least offering reasonable coverage, I have not done due diligence, and a smart lawyer would come after us for that.

In terms though of your personal exposure AFTER your carrier had paid out, as suggested upthread, that’s the realm of lawyers. A smart claimant ('s lawyer) will go after the reasonable limits of all possible existing coverage, and some of the negligent issues above, but they’re likely to avoid the whole “blood from a stone” route. But liquid assets, real property (depending on state laws), etc., well, that’s why I mentioned the duty to insure properly for your assets.

18

And the lack of actual bumpers.

19

In the case I talked about it’s possible that information would have saved some time. The damages were far more than his auto insurance covered and the plaintiffs wouldn’t settle for that so he had to turn to his homeowner’s policy. That took time to work out, and then the plaintiff continued to hold out for a while. Not saying it actually would have made a difference, but maybe knowing the total insurance coverage he had they might have settled sooner and save them both some legal costs. The amount of coverage doesn’t have anything to do with actual damages as you say, but I think in reality it often does in the end because for most people insurance is the only way to cover expensive judgements.

20

As far as the expensive painting in the back seat I don’t think cargo is covered at all by the auto insurance. That falls under your homeowner insurance.