Car insurance question?

[trekkor]

A young friend of mine was driving his parents car and hit a car causing damage that exceeded their $25k coverage by $10k. OUCH!!
( whacked a new Tesla )

I had not heard of liability limits on the other car before.

The other company is demanding the $10k out of pocket.

What are the options here?
Wouldn't the other driver's uninsured motorist policy pick up the balance?

I suggested he get legal counsel, but he's already talking to the insurance company and considering a payment plan or something.

[slodave]

Kinda screwed.... They can go after you personally to cover the overage. Don't ask how I know.

The parents really should have higher coverage.

[Arizona_928]

I'm surprised the insurance co. Covered the first 25k.

[slodave]

Why? That's what they are there for. Hit a car hard enough and you'll need a lot of money to repair it.

[Arizona_928]

Not his policy.

[slodave]

He's under his parents policy.

[Arizona_928]

Yeah, I just thought about that.... Hmm

[slodave]

Policy ran out at 25 grand. Damage was estimated at 35 grand. The other party's ins. co. has every right to go after personal finances to cover the rest. The kid and parents are screwed.

[slodave]

The really unfortunate thing, is that his parents premium will go waaaaay up or they will be dropped. The latter most likely. When they pick up new ins., they will be paying through the nose and will probably be paying even more, because they'll realize they need higher coverage.

[Arizona_928]

Any chance of being able to settle?

[FastCarFan]

I can't understand why anyone would only carry $25k liability coverage...especially with a young driver in the household! That's just stupid. What if the other party had been injured? It wouldn't take long to exceed $25k. They're putting all of their assets at risk...to save a little $. They're very lucky the damage was only $35k.

[74-911]

Originally Posted by FastCarFan

I can't understand why anyone would only carry $25k liability coverage. That's just stupid. What if the other party had been injured? It wouldn't take long to exceed $25k. They're putting all of their assets at risk...to save a little $. They're very lucky the damage was only $35k.

Agree 100%. The minimum liability amounts required were probably set 40-50 years ago when 25K would cover most accidents. That is just a drop in the bucket in today's world of car prices and medical care. Minimum of 100K would be much more realistic and you can reach that easily.

[legion]

Most of them were set around 30 years ago, before plaintiff's attorneys drove the cost of settling an accident through the roof and when cars were much cheaper relative to income.

$25k gets you enough to replace a car that is a step above an econobox (like a Chevy Malibu), if you hit one. And that's if they don't go after you for punitive damages.

When those limits were set, mostly likely in the 80's, a Ford Mustant 5.0 cost around $8,000. Today a similar car costs around $35,000. So that $25k in coverage in 1985 would require around $100k in coverage today to have the same level of protection.

[stomachmonkey]

Originally Posted by slodave

Why? That's what they are there for. Hit a car hard enough and you'll need a lot of money to repair it.

Originally Posted by AZ_porschekid

Not his policy.

Some states it does not matter.

In NY vehicle owner is liable.

[jcommin]

Originally Posted by slodave

The really unfortunate thing, is that his parents premium will go waaaaay up or they will be dropped. The latter most likely. When they pick up new ins., they will be paying through the nose and will probably be paying even more, because they'll realize they need higher coverage.

^ this

[Steve Carlton]

Originally Posted by FastCarFan

I can't understand why anyone would only carry $25k liability coverage...especially with a young driver in the household! That's just stupid. What if the other party had been injured? It wouldn't take long to exceed $25k. They're putting all of their assets at risk...to save a little $. They're very lucky the damage was only $35k.

I think the $25K limit on the kid's parents' policy was the limit for property damage. There would be other coverage for injuries, but again, not much. It's amazing to me that insurance companies offer limits that are too low. It's insane for the parents to carry insurance with such low limits regardless of who's driving in their household. They'll be paying for their stupidity now. As mentioned, they're lucky it was only $10K over the limit. The Tesla driver probably had under-insured coverage, will be paid on their car, and their insurance company will recoup the money from the kid's parents. Assuming the kid was at fault, which is sounds like he was.

The Tesla owner is still screwed. Their car will likely never be the same and they will have an accident on their Carfax to diminish the value of it as well. I doubt they'll collect on diminished value. Hopefully, the car is leased and it won't be their problem.

[tuxdu]

Been an Insurance Agent for over 17years and each State sets minimum accepted liability limits for auto insurance. Here in IN the state minimum for property damage is $10,000 with bodily injury at $25,000/$50,000 per accident.

As an agent, I refuse to write the state minimum coverage for any customer, as that is my agency policy. My duty as an agent is to protect BOTH the customer and the other party as best I can when an accident occurs. With newer vehicles costing easily over $25k a person is taking a real risk of having to pay out of their personal pocket especially if multiple vehicles are involved.

Coverage for the son is automatic unless he was "excluded" from the policy as a driver even if the son was not living in the house (permissive use applies). Insurance company will most likely surcharge the policy premium 20-30% but rarely will cancel the policy for 1 accident or incident.

Advise to all on this forum is to talk with your agent and review your coverages. Agents should be viewed as a friend versus foe and not trying to "take more money". It will negate any "surprises" when an accident occurs.

Dale

[JAR0023]

Limits of liability seems to have been covered. For those still wondering you have to have some limit to liability or the insurance company will have no way of setting a premium. You can't assign a premium until you have assigned maximum risk.

Back to the situation. It varies by state but the parent's/kid's insurance company should have noticed the limits issue up front. They should have gone to the other carrier and informed them of the limits issue. They should have offered to tender their limits in exchange for releasing their customer of any further liability. This happens way more than you'd think. I've done it a bunch of times when I worked that end. The other carrier does not have to accept the partial settlement or sign the release but most do. Sort of a gentleman's agreement and more for material damage than injury. BUT...always a but. Not every insurance company wants to go along, not every insurance company is part of arbitration etc. Some companies just like to litigate everything.

I'd be pissed if my insurance carrier tendered limits and failed to secure a release and left me hanging. When I started there was no compulsory insurance in MS. When compulsory liability went into effect 1/1/2001 the minimum required property coverage was only $5k. In 2006 that amount was raised to $25k. -J

[JAR0023]

Originally Posted by trekkor

The other company is demanding the $10k out of pocket.

What are the options here?
Wouldn't the other driver's uninsured motorist policy pick up the balance?

The other company did cover the damages. Whether by first party collision coverage or underinsured coverage. They can't really collect from your friend until they have spent some money. One they incur expenses, they have a right to subrogate the at fault party to recover those expenses.

Less than reputable folks simply ignore the insurance company for as long as they can. Small amounts get written off eventually. Larger amount like in this case the insurance company will continue to pursue up to and including taking the matter to court and garnishing wages. The payment plan you mentioned might be the best outcome at this point. Still, a release, if attainable, would have made a huge ($10k) difference for you friends.

One more thing to look at. That $35k amount of damages needs to be documented and correct and reasonable. If there was $35k in damage, fine. If there was $25k in damages but the owner/shop/Ins. Co padded the damages with frivolous and unnecessary items then it can be argued that some of this amount is not owed. We review all incoming subro demands for accuracy. -J

[FastCarFan]

Originally Posted by Steve Carlton

I think the $25K limit on the kid's parents' policy was the limit for property damage. There would be other coverage for injuries, but again, not much. It's amazing to me that insurance companies offer limits that are too low. It's insane for the parents to carry insurance with such low limits regardless of who's driving in their household. They'll be paying for their stupidity now. As mentioned, they're lucky it was only $10K over the limit. The Tesla driver probably had under-insured coverage, will be paid on their car, and their insurance company will recoup the money from the kid's parents. Assuming the kid was at fault, which is sounds like he was.

The Tesla owner is still screwed. Their car will likely never be the same and they will have an accident on their Carfax to diminish the value of it as well. I doubt they'll collect on diminished value. Hopefully, the car is leased and it won't be their problem.

You may be right about it being a $25k property damage limit, but it is still far too low. The Tesla incident proves that it is too low. What if more than one expensive car had been damaged?

I have what is called a combined single limit - a single liability limit for both property damage & bodily injury. It allows flexibility, depending on the need. It could all theoretically be used for bodily injury, for example. I also have an umbrella policy. Umbrella policies are incredibly inexpensive protection - anyone with any assets at all should have one.