Auto Insurance Policy Coverage – What It Means For The Plaintiff and the Defendant

Posted on March 26, 2017

The amount of third-party liability coverage on an automobile insurance policy is highly relevant to a personal injury lawsuit.

The “third-party liability coverage” is what protects an automobile owner/driver when he or she is sued for causing an accident that resulted in injury or death to someone else (a third party).Some people are surprised to learn that when the third party, now a plaintiff in a personal injury lawsuit, receives financial compensation for his or her injuries, that money is paid by the defendant’s insurance company, not by the defendant personally. In some instances, the plaintiff’s own insurance company pays all or some of the financial compensation. Only in rare circumstances does the defendant personally pay the plaintiff.

While every driver is legally required to carry at least $200,000.00 in third-party liability coverage, many increase this coverage to $1 million or more.What impact does third-party liability coverage have on each party to the lawsuit?

In the context of a personal injury claim, the applicable third-party liability coverage is the coverage in place at the time of the accident, even if the defendant later changes his or her coverage.Obviously, the more coverage carried by the defendant, the more money there will be to compensate the plaintiff for his or her accident-caused injuries. The plaintiff does not automatically receive this money. The amount paid to the plaintiff is either negotiated by his or her lawyer “out of court” or awarded at trial. The defendant’s third-party liability coverage amount is simply the maximum amount that the defendant’s insurance company will pay.

If the plaintiff had higher third-party liability coverage than the defendant did at the time of the accident, the plaintiff’s own insurance company may pay compensation to the plaintiff, up to the amount of the difference in coverage.Unfortunately, the defendant’s third-party liability coverage is not always enough to fully compensate the plaintiff. For example, this can happen if the plaintiff is injured to the point of needing round-the-clock nursing care for the rest of his life, or if she had a high-paying job and is no longer able to work at all.

Moreover, the defendant’s third-party liability coverage responds (i.e. pays) to the single accident, not to the number of people injured in that accident. So, if three people are injured in the same accident and each of them sue the at-fault driver who has $1 million in coverage, and none of the plaintiffs have higher coverage themselves, all three of those plaintiffs will have to share the $1 million amongst them. This can be a devastating reality if all three have been gravely injured.If at trial the judge awards the plaintiff more money than the defendant has available in third-party liability coverage, the plaintiff can pursue the defendant personally for payment. If the defendant owns a home, vehicle, or other assets, he or she may be forced to sell these in order to pay the plaintiff.

Sometimes a person is injured in a hit-and-run, or by a driver who did not carry any insurance. As part of their policy, all insured drivers have an automatic $200,000.00 in coverage available to them if they are injured by an unidentified or uninsured driver.

This article is not a substitute for legal advice. If you have any questions, please contact us at 519-946-4300.