On a summer day in Dallas, Texas, you’re driving your big rig along US Highway 20. An 18-year-old girl, on the phone, hits you.
Everyone’s okay and the girl’s given a ticket. But your truck has $20,000 of damage. You file a claim with her insurance company, State Farm, but they say they can’t pay you yet. “Why not? It was clearly this girl’s fault!” State Farm says there might be a “limits issue”.
“What’s a limits issue?” you wonder. A limits issue happens when an at-fault driver doesn’t have enough insurance coverage to pay the claims. The at-fault driver’s insurance company may only be obligated to pay the amount listed on her policy. If it’s not enough to pay everything, decisions have to be made.
Turns out, the 18-year-old only had a $10,000 policy. Since you have a $20,000 repair claim, State Farm must address the issue of limits of coverage.
If the adverse had been a heavy truck, there would probably have been plenty of insurance. Most semis carry at least $750,000 to $1,000,000 in coverage. But, when the adverse is a car, the insurance policy may be minimal.
In this case, State Farm may offer you the entire $10,000 policy limits if you’re the only claim. To get the money though, you’ll probably have to sign a release, agreeing not to go after State Farm or the 18-year-old for anything else (like your downtime or other expenses).
Do you have to accept their 50% offer? No, you don’t. Be sure to consider all options before making a decision.
You might consider suing the 18-year-old, getting a judgment, and going after any unprotected assets she has. But only do so if it is worth your while.
How Do You Decide Whether to Sue?
An asset check helps decide if it’s worth jumping through the hoops of litigation. Often, drivers with small insurance policies don’t have anything worth insuring. So, make sure litigation is worth the effort. Even if you are successful in getting a judgment for all of your losses, what good is a judgment if the other side’s got nothing? Remember, even if the other side has assets, they might be able to file bankruptcy and wipe away the judgment.
If suing the at-fault driver isn’t going to be worth it, how can you be made whole? There may be other options, including:
1. File a Claim with Your Own Insurance Company
If you haven’t filed a claim for repairs on your own policy, consider it. This is especially true if the alternative is large amounts of downtime or going out of business. Ask your insurance agent if it would be a ding on your insurance record to file a claim. If you do file a claim with your own insurance company, ask if they will try to get reimbursed by the at-fault party. This is called ‘subrogation’. So, for example, you file with your own insurance company, Progressive. Progressive pays you for the repairs and then “subrogates” the claim against the 18-year-old and State Farm.
2. Made Whole Doctrine
One strategy to get a bigger piece of the pie is to ask your own insurance company to step aside and allow you as the insured to have the whole limits amount. Some state laws allow for insureds to be made whole before their insurance companies are, and others don’t.
For example, if Progressive paid out $20,000 for your repairs and you also had $10,000 in downtime, you could ask your own insurance company to step aside and waive their claim of $20,000 to allow you to have the whole pie. This would make you whole.
3. Uninsured/Underinsured Motorist Coverage
Check your policy to see if you have UM/UIM coverage. Depending on the state, this may be a way to get additional expenses paid that aren’t in your physical damage policy (like loss of use, diminished value, and other out of pocket expenses).
Protect Yourself and Your Business
Limits issues can be a bit tricky. If you find yourself in the middle of a claim with too little insurance, contact an insurance attorney for advice. If you do your research, ask questions, and hire the right experts, you should put you and your business in a better spot.