What happens when automobile insurance company sends you a letter explaining you’re about to get sued for an auto accident?  Don’t panic.  You have insurance for a reason. I get this phone call a lot. Someone was at fault for a car wreck and then insurance company sends them a standard letter saying that they can be sued beyond their insurance coverage so they may want to retain their own attorney.  Those letters don’t contain the entire story.

First, yes, no one must accept the limits of your insurance policy to resolve their personal injury claim; that is true. However, your insurance company has a duty to defend you up to those limits, settle that injury claim within those limits if possible and hire an attorney, at their expense, to defend you.  When an insurance company fails to settle a claim within the limits of an insurance policy and they could reasonably have done so, they can be subject to a claim for “bad faith” or violation of the Unfair Claims Settlement Practices Act.   A “bad faith claim” claim means that they, the insurance company, can be held labile for damages outside the insurance policy they issued.

Second, you must look at the process of a car wreck injury claim to understand that in most cases, it is not worth suing someone beyond their insurance coverage.  Let’s start with the obvious, if I own a Mercedes and have millions in the bank, chances are I am not driving around with just $25,000 in insurance coverage. The at-fault drivers who have low amounts of insurance, also tend to have very few assets they are trying to protect.

So, if you’re about to get sued for an auto accident, while I can get a judgment against someone for millions, that judgment is problem worthless if they don’t have a bank account and they live paycheck to paycheck.  Also, if an insurance company offers my client the maximum on an insurance policy, e.g. $25,000, and I proceed to litigate the claim against their claim trying to obtain a judgment for $100,000, they don’t pay my client the $25,000 unless we are successful on the claim. Essentially, they can’t just pay the $25,000 and be out of the lawsuit.

Lastly and most importantly, most of the time we have underinsured motorist coverage we can use instead.  Whenever an insurance company makes a policy limit offer, i.e. the maximum amount of insurance under that insurance policy, I look for underinsured motorist coverage on my client’s own automobile insurance policy.  Essentially, underinsured motorist coverage transfers the risk that the at-fault driver does not enough insurance to satisfy my client’s injuries to my client’s own automobile insurance carrier.

Right now, I am handling such a case as the one I described above.  The at-fault driver was only insured for $25,000 but my client is scheduled for a shoulder surgery, and I anticipate his total medical bills being close to $60,000.  The at-fault driver has offered their $25,000 policy limits and I have put my client’s automobile insurance on notice that I am going to make an underinsured motorist claim for his remaining damages.  In the case I am talking about, there is $100,000 of underinsured motorist insurance.  While the insurance company will argue with me as to the value of my client’s claim, I have a potential of recovering $125,000 on behalf of my client.

Click here to listen to my podcast episode about Uninsured and Under Insured Motorist Coverage.

So, instead of suing the at-fault driver beyond their insurance coverage, it is more beneficial to make a claim for underinsured motorist benefits and let my client’s automobile insurance sue the at-fault driver to recover whatever they pay out to my client.  But, just in this instance, an insurance company must follow a procedure to be able to preserve their rights to sue the at-fault driver directly. Most insurance carriers in Kentucky elect not to preserve their rights against the at-fault driver when dealing with an underinsured claim.

If you’re about to get sued for an auto accident, yes, you should be concerned.  However, hopefully you have the right insurance in place.  Take a deep breath and promptly communicate with your insurance company.  You will get through this.