Auto Accident Victim Compensation
Every year, millions of people are injured or killed in automobile accidents or suffer property damage, usually costing many thousands of dollars. Auto insurance is the most common means of indemnifying victims, but some drivers have no insurance and some injuries cost the victim much more than the indemnification received through insurance.
Consequently, states have enacted various laws to promote financial responsibility among drivers or to compensate victims for accidents where insurance coverage was not available, including: financial responsibility laws, compulsory insurance laws, uninsured motorist coverage, unsatisfied judgment funds, low-cost auto insurance, "no-pay, no-play" laws, no-fault auto insurance.
Financial responsibility laws generally only require proof of insurance after the driver has an accident or was convicted for certain offenses, such as reckless driving or driving under the influence. Failure to satisfy the state's requirements generally results in the revocation or suspension of driving privileges. Other ways that the financial responsibility law can be satisfied is demonstrating that the person has the financial wherewithal to self-insure; depositing securities or money into an account in the amounts required by law or by posting a bond.
The problem with financial responsibility laws is that the amount of insurance required is minimal and will not cover many accidents. Also, financial responsibility laws do not insure compensation for an accident victim that is injured by an uninsured driver, driver of a stolen vehicle, or a hit-and-run driver. Furthermore, irresponsible drivers often drive without a license, so revoking the driver's license is often ineffective.
Compulsory insurance laws require that motorists prove that they have the required minimum of liability insurance before the motor vehicle can be licensed or registered. Nonetheless, generally around 13 to 14% of motorists are uninsured, with a higher proportion in big cities where insurance costs are substantially higher than in rural areas.
Unsatisfied judgment funds compensate auto accident victims who have no other means a recovery. However, only 5 states have unsatisfied judgment funds: Maryland, Michigan, New Jersey, New York, and North Dakota. To qualify for the compensation the accident victim must generally obtain a judgment against the negligent driver and show that the judgment cannot be collected. The amount that can be collected is generally reduced by any other forms of compensation, such as workers' compensation or other insurance. Another drawback of the unsatisfied judgment fund is that the maximum that can be recovered is generally the low minimum requirement of the state. When a victim is compensated by the fund, the negligent driver must pay the fund or risk the loss of his license. The negligent driver's legal liability to the victim remains.
Uninsured and underinsured motorist coverage is another means of compensating accident victims, where the injured victim can receive compensation from his own insurance company if the negligent driver's uninsured or underinsured. Uninsured motorist coverage also covers injuries caused by hit-and-run drivers or a negligent driver whose insurer is insolvent. Most states require a minimum of uninsured motorist coverage, although some states allow going without if the driver signs a waiver.
Compensation is generally received faster when it is obtained from the victim's own insurer because of the uninsured or underinsured motorist coverage than it would be through a lawsuit. However, drawbacks to uninsured motorist coverage is that the victim must prove that the other driver was liable, which may be difficult. Coverage is generally limited to the low requirements imposed by states unless the insured specifically obtains higher coverage. Furthermore, in many states, property damage is not covered.
Low cost auto insurance. One of the most common reasons that drivers do not buy car insurance is because of the expense. So some states have responded by offering a low cost auto insurance policy for low income drivers. These policies generally only cover liability — nothing else. However, the success of low cost auto insurance has been limited, since many drivers still cannot afford even the lower cost offered by the state.
"No-pay, no-play" laws prohibit uninsured motorists for suing negligent drivers for noneconomic damages, such as pain and suffering. Some states, such as Michigan require that the uninsured driver be responsible for 50% or more of the accident before the right to sue is restricted. Some states also prevent lawsuits for noneconomic damages for drunk drivers or by motorists who commit intentional acts, especially if the act was a felony.
Half of the states now have some form of no-fault auto insurance, where, if the insured is injured, then she can collect from her own insurance company regardless of who was at fault. If the claims exceed a certain threshold, then the injured party can still sue the negligent party. Most states give the injured party some options, but the right to sue is more restricted than what it would otherwise be.