Auto Accident Without Auto Insurance? Options to Respond to Insurance Company Claim


The other day, an imaginary potential client named “Crash” walked into my imaginary office. He asked this common question uninsured drivers have after an auto accident:

I got into an auto accident earlier this year. The other driver sustained enough damage to need a new bumper, while my car was totaled. We exchanged information, no police came to the scene even though they were called. The following morning I found out my auto liability insurance lapsed and was terminated. I had minimal contact with the individual that was hit at first. I paid his deductible for his insurance.

Four months go by with no word then i get a letter from an insurance claims company that i owe $25,000. What do you recommend i do? I was expecting to pay for damages but 25k seems like overkill.

Here are some free defense attorney tips that may help address, or avoid this problem.

1. A Claim Is Not Settled Unless There Is a Signed Settlement Agreement.

When Crash paid the other driver’s insurance deductible, he probably thought he was settling the entire claim against him. Unfortunately, without a settlement agreement that is signed by the other driver, there is no proof of a settlement. And the payment of a deductible is only a fraction of what the real damages may be.

A negligent driver is responsible to pay for all damages he/she causes, even if the other driver had insurance coverage.

In short, paying a deductible is not settling a claim. The real amount of money Crash owes the other vehicle owner legally is probably much more than the deductible he paid.

2. An Insurance Company That Pays a Loss May Be Able to Recover It In “Subrogation” From Negligent Driver.

If the other driver’s insurance company paid out money to its own insured for damages caused by Crash’s negligence, the insurance company may be able to sue Crash in civil court to recover its payment.

The act of an insurance company pursuing a claim to recover money it paid out is called “Subrogation”. Generally, the insurance company seeking subrogation can only recover what it actually paid out, plus the deductible for its customer. (More info from Department of Insurance CA)

Usually when an insurance company seeks “Subrogation” it is to recover the property damage payment they make to their own insured. A subrogation claim may also arise when an insurance company pays its customer on an “Uninsured Motorist Claim”. After paying its own customer who bought uninsured motorist coverage, the insruance company can sue the negligent driver to recover payment.

However, just because an insurance company pays on an uninsured motorist claim does not mean it is automatically entitled to repayment. subrogation claims still require the claimant (insurance company) to prove that the alleged debtor was in fact negligent and legally responsible for the damages.

The insurance company’s determination of fault is not binding in court. Once in court, it is the evidence presented in court that determines legal liability.

3. An Insurance Company Cannot Sue for Personal Injury Damages, Unless They Paid for Them.

In this fact pattern we are discussing, Crash may owe the insurance company something. But what he owes is limited to what the insurance company paid out. The insurance company cannot act as the Plaintiff’s Personal Injury Attorney for anyone. They cannot sue for future damages, or future loss wages of its insured, for example. Only the injured party may make those sorts of future, unpaid claims.

Crash should verify what the figure of $25,000 in this claim is based upon. If it is personal injury damages that have not been incurred and paid yet, then he should not pay the claim.

4. An Insurance Company’s Determination of Fault Is Not Binding.

Crash is free to reject the insurance company’s claim. He can tell them to go pound sand without any consequences. Unless and until the insurance company sues him and wins in court, it is nothing more than a disputed, unproven claim. Insurance companies cannot force someone to pay a subrogation claim without court action.

Further, once in court, whether small claims or full jurisdiction civil court, an insurance company’s determination of fault is not admissible to prove liability. Why? Because the insurance company was not at the accident, they are a biased party with a financial stake in the outcome of the claim, and because they are not qualified as accident reconstruction expert witnesses who are allowed to give opinion testimony in court.

5. What Should Crash Do in Response to This Claim?

A. Hire An Attorney for Advice and Help Responding.

A claim of this size probably requires professional legal help. Crash should consult with an attorney who can sort through this claim, and verify it or debunk it. The trouble is that without auto insurance coverage, Crash has to pay for this attorney time himself. He has no insurance company to pay for defense costs.

But what if he wants to do it alone? What if the claim is smaller, say $9,999 or some other small claims jurisdiction amount?

B. Dispute the Claim in Writing.

If Crash disagrees with the insurance company’s claim, he may dispute it. There is nothing the insurance company can do to force him to pay if he disputes it – until – unless – they sue in court.

It is best to dispute such a claim in writing. If Crash were my client (he is not) I would recommend that he demand written copies of all receipts, checks, and other documents that prove the amount of money they actually paid out.

If Crash disagrees with the liability determination of the insurance company, he should notify them in writing, and write a demand letter of his own listing the facts as his evidence shows them to be.

C. Make A Counter Offer.

If Crash feels that he is responsible for some of the damages, he may make a written counter offer. It is a common practice and is a good way to work on settling this disputed claim. In a written counter offer, Crash could list the facts and the evidence from his point of view, present the nature of the damages he is willing to pay for, and perhaps, offer to appear in a private mediation to settle the claim.

If the claim is settled by counter offer, Crash will need to get a signed settlement agreement releasing him from all other claims from this insurance company and their insured(s).

D. Counter Claim if Liability Is Disputed.

If Crash has damages of his own that he feels were caused by the other (negligent) driver, Crash should present a demand letter to that other driver and the insurance company for that driver at the same time in writing.

If they do not pay Crash’s counter claim, he has the right and option to sue in civil or small claims court. He can do it with or without an attorney. However, if he was uninsured at the time of the accident, Crash’s damages, if the other drivers was legally negligent, may be limited by law. (Related article: What Happens If You Get Into An Accident Without Auto Insurance?)

Questions? Leave a Comment below.

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