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chapter21autoinsuranceii.ppt

Chapter 21

Auto Insurance (Continued)

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Agenda

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Approaches for Compensating Auto Accident Victims

Many accident victims are unable to recover damages
The negligent driver may be uninsured or underinsured
States use a number of approaches to protect accident victims from irresponsible or reckless drivers
A financial responsibility law requires motorists to furnish proof of financial responsibility up to certain minimum dollar limits

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Approaches for Compensating Auto Accident Victims (Continued)

Evidence of financial responsibility can be provided in several ways:
Producing evidence of an auto liability insurance policy with at least certain minimum limits
Posting a bond or depositing the amount required by law
Showing that the person is a qualified self-insurer
Financial responsibility laws provide limited protection against irresponsible motorists
There is no guarantee that all accident victims will be paid
State laws require only minimum liability limits, which are relatively low

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Exhibit 21.1 Automobile Financial Responsibility Limits by State

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Exhibit 21.1 Automobile Financial Responsibility Limits by State (Continued)

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Approaches for Compensating Auto Accident Victims (Continued)

A compulsory insurance law requires motorists to carry at least a minimum amount of liability insurance before the vehicle can be licensed or registered
Some argue that the law provides greater protection against uninsured drivers because motorists must provide evidence of financial responsibility before an accident occurs
Critics argue that mandatory insurance does not reduce the number of uninsured drivers
Computer reporting systems to track uninsured motorists have not been effective

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Approaches for Compensating Auto Accident Victims (Continued)

A few states have established unsatisfied judgment funds for compensating auto accident victims who have exhausted all other means of recovery
The accident must obtain a judgment against the negligent motorist and show that the judgment cannot be collected
The amount paid by the fund is limited by state law and may be reduced by collateral sources
The negligent driver must repay the fund
States use different methods for financing the benefits, e.g., through insurer assessments

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Approaches for Compensating Auto Accident Victims (Continued)

Many states require uninsured motorists coverage
The injured person’s insurer agrees to compensate for bodily injury caused by an uninsured motorist, a hit-and-run driver, or a negligent driver whose insurer is insolvent
One advantage is that claim settlement is faster than a tort liability lawsuit
The injured person must show that the uninsured motorist is legally liable for the accident
The minimum limits are low, so an accident victim may not be fully compensated

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Approaches for Compensating Auto Accident Victims (Continued)

Low-cost auto insurance provides minimum amounts of liability insurance at reduced rates to motorists who cannot afford regular insurance
Goal is to reduce the number of uninsured drivers
Several states have enacted “no pay, no play” laws which restrict uninsured motorists from suing negligent drivers for noneconomic damages

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No-Fault Auto Insurance

No-fault auto insurance is another method for compensating injured accident victims
Currently, 22 states, the District of Columbia, and Puerto Rico have some type of no-fault law in effect
After an auto accident involving bodily injury, each party collects from his or her own insurer regardless of fault
Enacted because of dissatisfaction and defects in the traditional tort liability system

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