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It Wasn't My Fault!January 7th, 2009 Noyes Hall & Allen
You’re in an accident, and you think it’s clearly the “other guy’s (OG) fault”. You’re trying to decide whether to use your own policy or go against the OG’s company. This is an issue we discuss with several clients a month. The answer and the process can be confusing.
Your Insurance or Theirs?
Let’s talk about the ramifications of using your own insurance (called a “first party claim“) vs. making a “third party claim” against OG’s liability coverage. This assumes that you’ve bought collision coverage for your vehicle. If not, then you have no choice but to go against OG’s policy.
First, a clarification. You bought your insurance to protect your asset – your vehicle. When you bought the policy, you made business decisions about how much of a deductible you were willing to assume, whether to buy rental coverage, etc. Your insurance company will pay for your own loss subject to the limits you chose. Auto policies also provide liability coverage. This assumes your responsibility for damage you cause in an at-fault accident. A driver who is 100% at-fault in an accident is responsible for 100% of the damages they cause. The insurance company pays without deductible, up to the liability limits on the policy or the amount of damages, whichever’s less.
Now, back to the process of deciding whose insurance to use.
Using Your Insurance: PROS
- You KNOW you have insurance. You can never be sure about OG, despite getting a policy number or insurance card at the accident scene.
- You’re dealing with your own insurer. You are their customer.
- The process is often faster, because you’re not arguing about whose fault the accident was. You are probably able to reach a settlement faster.
- You have an agent to help you through the process (assuming that you bought your insurance from a person and not an 800 number or web site).
Using Your Insurance: CONS
- You’ll have to pay your deductible up-front to have your vehicle fixed. If your company is successful in collecting from OG’s insurance (a process called “subrogation“), they will refund your deductible to you.
- You may not have purchased rental coverage, and if you did, it has a daily dollar limit and a maximum dollar limit.
- The subrogation process takes time; even if your company successfully subrogates against OG’s company, you will probably have to wait for weeks to get your deductible back.
- If your insurer isn’t successful in subrogation, they may count your accident against you. This could raise your rates down the road.
Using The Other Guy’s Insurance: PROS
- You collect directly from OG’s insurance company. You do not have to pay a deductible, because you’re using OG’s liability insurance.
- If you need to rent a replacement vehicle while yours is unavailable, there is no daily or maximum dollar limit. As long as the vehicle is a reasonable replacement for what was damaged, OG’s company pays 100%.
- Your insurance company won’t count the accident against you, because it was “not-at-fault”.
Using The Other Guy’s Insurance: CONS
- OG may not have insurance – even if they presented an insurance card at the accident scene. And, even though it’s mandatory. They may have not paid their premium or canceled their policy.
- OG may not have ENOUGH insurance. Maine only requires drivers to carry $50,000 per person for injuries to other parties and $25,000 property damage. If you’re tooling around in a modest late model vehicle, $25,000 may not be enough to replace it if it’s totaled.
- OG’s insurer may not readily accept liability. Some companies “play nicer” than others (we won’t name names here). Some are notorious for denying liability, no matter how clear-cut it may seem. This can drag out the whole process of getting you and your car back on the road, making it longer and more inconvenient than it needs to be.
- A police report may be necessary to prove who’s at fault, especially if your story and OG’s don’t match. Some police departments are very quick to prepare accident reports and make them available. Others can literally take weeks.
- Your agent won’t be able to help as much as in a first party claim. They may be able to offer advice, but since they probably don’t represent the other company, they won’t have much influence with them.
What To Do?
As you can see, it’s not a simple decision, and it depends greatly on the circumstances of your individual case. That’s just one reason why buying insurance from an agent – a knowledgeable advocate – is a smart decision. If you bought your policy from an 800 number or the internet, you won’t have a trusted advisor to help you decide which way to go with your claim.
Future posts will offer tips for dealing with
the claim process itself. Drive safely!