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Why Doesn't Insurance Just Take Care of It?

When talking to someone who was injured in an auto collision, a question we often hear is, "Why isn't the other guy's insurance just paying for this?" To answer this question, we need to look at how auto insurance works and the difference between auto liability coverage and other types of auto insurance coverage.

There are mainly two types of insurance: Insurance that pays for injuries or property damage sustained by the policyholder or his or her family, such as health insurance or fire insurance, is called "first-party insurance." Insurance that pays for injuries or property damage sustained by others for which the policyholder may be legally liable is called "third-party insurance."

When you purchase an auto insurance policy, you are often purchasing several different types of coverage, including both first-party and third-party coverage. First-party coverage includes collision coverage (often called "full coverage" by the layman), comprehensive coverage, personal injury protection ("PIP"), medical payments, and uninsured/underinsured motorist coverage. Third-party coverage includes the coverage everyone is required to have-liability coverage.

With the important exception of uninsured and underinsured motorist coverage (which is a topic for another post), first-party insurance is usually "no fault" insurance. Your insurer has to pay claims under "no fault" coverage regardless of who was at fault in the collision. For example, if you have collision coverage, your insurer has to pay to repair your car or to compensate you for a total loss even if you were at fault.

In contrast, auto liability insurance is only required to pay claims for which the insured, in the words of the insurance policy, "becomes legally responsible." If you are injured in a collision with another driver, this means the other driver's insurance is not legally required to pay for your medical expenses, lost income, or other damages unless and until you sue the other driver and the court enters a judgment against the other driver awarding damages. If you sue the other driver, the other driver's insurance company will provide at its own expense a lawyer to defend the other driver in court.

Auto liability insurers do generally try to settle claims against their policyholders before a suit is filed or the case goes to trial. However, the liability insurer has little incentive to offer you a reasonable settlement to compensate you for your damages unless the insurer believes you are prepared to take your case to trial. As a result, when you file a personal injury claim with the other driver's insurance without a lawyer, the amount the insurance company will offer to settle your claim (if it offers anything at all) is usually significantly less than what would reasonably compensate you for your injuries and will often not be enough to cover even your medical expenses. This is why it is important to consult with an attorney before settling a personal injury claim with an auto liability insurer.

If you or someone you know has been injured in an auto accident or is involved in a dispute with an insurance company, contact the attorneys at Abraham, Watkins, Nichols, Sorrels, Agosto & Friend by calling 713-396-3964 or 1-800-594-4884.

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