Can Auto Insurance Defend You from Lawsuits?

Even if you have liability auto insurance you can still be sued by third parties who blame you for their injuries and damages. Even if the third parties know you have insurance, they need to sue you (not the insurance company) if they believe your insurer is taking too long to settle their claims or still disputing who was at fault in an accident. At times, injured parties may sue you to put pressure on your insurer or not to miss deadlines to register their objection to how your insurer handles their claim. Standard car insurance policies usually have a “duty to defend” if the policyholder is sued in a civil court for liabilities arising from an accident. In most cases, your insurer will appoint a lawyer to defend you if you have the coverage and the accident happened by run-of-the-mill reasons like carelessness or weather conditions.

Liability vehicle insurance is part of a standard policy and provides coverage up to the limits stated for other people’s injuries and damages in an accident in which an insured driver was at fault. So, third parties can claim on your policy for their losses. If you don’t have insurance, you may have to pay for all the damages out of pocket.

You will always need to check the specifics of your policy. Under the normal circumstances, your automobile insurance provider has a duty to defend you and they will provide a lawyer to defend any lawsuit filed against you because you are blamed for causing an accident in which people got injured and/or suffered financial losses.

However, there are exceptions and conditions that may release your insurer from their duty to defend you and they are;

  • If you failed to notify your insurer of the accident and injuries, they may refuse to provide a lawyer to act on your behalf. There may be short time limits for notifying injuries in an accident and it can be as short as 14 days in some states to prevent fraud and allow the insurance companies to inspect the injuries in a timely manner. If you failed to inform your insurer, they may be within their rights according to the law to even refuse to deal with claims against you, leaving you on your own. However, there may be extenuating circumstances excusing a policyholder’s failure to notify their carriers. For example, you may be injured in the accident as well and were physically or mentally unable to contact them.
  • Vehicle insurance policies provide coverage for losses due to unavoidable and negligent actions, not intentional actions of the insured drivers. If the company thinks that the policyholder acted intentionally in causing the accident, they may consider the coverage and the duty to defend void. For example, auto insurance companies may consider driving drunk as an intentional conduct and an illegal action so they may refuse to provide any coverage for the consequent accident.
  • If your car insurance policy has already paid out up to the coverage limits, your insurer has no more duty towards you and they don’t need to deal with claims or lawsuits against you. They have done their job and it is up to you to deal with the rest of the claims. Liability coverage comes with limits. For example, if you have a limit of $25,000 per injured person, your insurer would stop once they pay that amount. If the injured person’s medical and consequential losses are more than the limit and decides to sue, you are on your own because your insurer is no longer under a legal or contractual obligation to defend you. So, they will not provide you with a lawyer or financial assistance.

Once your auto insurance company declines to provide you with any legal assistance or coverage, they will have to write to you stating their reasons. You will then have to look at your options accordingly.

People often don’t pay enough attention when they are buying vehicle insurance, which is a forward-looking product. You may never have an accident or have a big one, in which case you would pray you have sufficient coverage. You buy insurance because you never know what happens in the future. That is why motorists need to consider the worst-case scenarios and see if they can buy liability coverage for it within their budgets. Even if the first quote you got comes expensive, you should get a few more quotes to see if you can find cheaper companies that would allow you to buy more protection.