What Are Your Options When You’ve Been Seriously Injured And The Other Driver Only Has $30,000 In Insurance?
In Texas, the financial responsibility law requires that every driver have at least $30,000.00 in liability insurance. This works out well in most cases, but is sorely lacking in cases where there are serious injuries. The end result is grossly unfair. Unfortunately, your options are very limited when you are seriously injured and there is not enough insurance.
A BRIEF PRIMER ON AUTO INSURANCE
There are several different types of coverages that can be sold in an auto policy. The main ones are liability, collision, PIP, UM, and UIM. Of these, liability, UM, and UIM apply to personal injury and property damage, collision applies to property damage only, and PIP to personal injury only. If you get hit by another driver, his liability policy is the only coverage that is relevant. It does not matter if he had $100,000.00 In UIM or UM or if he had $10,000.00 in PIP, you can only look to his liability coverage. On the other hand, if you were a passenger in the at fault driver’s car, you will be able to file a claim on his liability and PIP coverages.
How much insurance can you buy? Liability coverage is usually sold in limits of $30,000.00, $50,000.00, and $100,000.00. If an insured wants more coverage than $100,000.00, he can buy an additional policy called an umbrella policy, which will cover any additional exposure beyond $100,000.00 up to $1,000,000.00.
HOW LIMITS WORK
Limits define the maximum that the insurance company will pay under each coverage. Liability limits are typically expressed as three figures, such as 30/60/30, which in this case means that the most the insurance company will pay for each accident is $30,000.00 for an injury to any one person, $60,000.00 for injuries to all injured persons, and $30,000.00 for property damage. In other words, if 2 or more people are injured, they will each receive a portion of $60,000.00, but no one person will receive more than $30,000.00. If a driver loses control of his vehicle and plows into a crowded sidewalk, injuring dozens of people, they will have to share $60,000.00. The same applies to property damage. If the at- fault driver damages more than one vehicle, house, fence, post, etc., each property owner will receive a portion of $30,000.00 but no one property owner can receive more than $30,000.00.
WHAT THE INSURANCE COMPANY PROMISES
An insurance policy is a contract between the insurer and the insured. As it pertains to liability, the insurance company promises to pay for any damages that its insured may become liable for – but only up to the amount of its limits. If you have suffered a serious injury, the other driver’s insurance company will fulfill its obligation under its contract by paying its limits, even if those limits are severely inadequate to compensate you for your injuries.
COST OF DEFENSE: It is important to note that the insurance company also promises to pay for the cost of its insured’s defense. What’s more, there are no limits to the amount that the insurance company will pay to defend its insured. So, theoretically, the company could pay hundreds of thousands of dollars in legal fees and case costs when its exposure is only $30,000.00.
THE LIMITS CONUNDRUM
So let’s look at a case where your injuries are severe but the adjuster tells your attorney the limits are $30,000.00. If the adjuster is smart, he or she will tender the limits. This not only limits the company’s exposure (see the Stowers discussion below) but also forces you into a difficult decision. You have two choices: You can accept the $30,000.00 and release the insurance company and the insured from further liability, or you can reject the offer and sue the driver. (Note: In Texas, you cannot name the insurance company in the suit, only the driver). If you choose to sue, here’s what will happen: You will incur additional expenses involved in filing suit, presenting evidence, and paying for expert witnesses. If you win at trial (and no matter how great a case you may think you have, a jury may not see it your way, so winning is not guaranteed), the insurance company will only pay the first $30,000.00 of the judgment and you must look to the driver himself to pay the rest of the judgment.
So, let’s say the jury awards you a million dollars. Congratulations! You will receive $30,000.00 of it from the insurance company and now you must look to the driver, who probably doesn’t have $1,000.00 in the bank, to pay you $970,000.00. The odds are you will never receive one penny of it. This is because people who buy minimum limits are people who don’t have much to lose. They are every day, working class people who buy the least amount of insurance required by law because that’s what they can afford. On the other hand, people that have a lot of money and property (people that have a lot to lose) will buy lots of coverage – usually $100,000.00 limits and a $1,000,000.00 umbrella policy.
EXPANDING THE INSURED’S COVERAGE – THE STOWERS DOCTRINE
Let’s again consider our scenario in which you were seriously injured in an accident but the at-fault driver was carrying limits of $30,000.00. Is there any way to make his insurance company pay more than the limits? Yes, there is one and only one way, and that is called the Stowers doctrine, a legal remedy arising from a Texas case from the 1920’s styled G.A. Stowers Furniture Company vs. American Indemnity Company.
Here is how the Stowers doctrine works: Let’s say your attorney provides the insurance company with all the facts necessary for a reasonable adjuster to make a reasonable evaluation of the case. Let’s say that based on those facts, any reasonable adjuster would determine that your case is worth much more than its insured’s limits and that, if the case is tried, you will likely win a judgment against its insured well in excess of the limits. Your attorney so informs the adjuster and gives him/her a reasonable amount of time, say two weeks from the date of the letter, to tender his/her limits. This is known as a stowers letter.
Let’s then say that the adjuster decides not to tender limits. Believe it or not, this sometimes happens – usually because the adjuster doesn’t think you can win your case. This has happened to me several times over the course of my career and each time the insurance company has had to pay hundreds of thousands of dollars more than their limits would have exposed them to.
Unfortunately, refusing to pay on a stowers demand, especially in a case with big injuries, is very rare. So this very limited way of expanding limits rarely works, simply because insurance companies don’t like to take risks. Even in a case so weak on liability for the Plaintiff that nine out of ten juries would find for the Defendant, why risk millions of dollars when you can close the case for $30,000.00?
WHAT OTHER OPTIONS DO YOU HAVE?
OPTION ONE: YOUR OWN INSURANCE:
So the at-fault driver’s insurance company agrees you have a big case and has tendered limits of $30,000.00. We already know an excess judgment against the driver will never get paid. What can you do? Your options are extremely limited but your attorney should pursue all possibilities. The obvious first choice is to look to your own policy – did you have Under-insured motorist coverage? If so, there will be more money there to help you pay your bills.
OPTION TWO: OTHER INSURANCE
Was the at-fault driver driving someone else’s vehicle? If so, the insurance that covers that vehicle and the insurance company that covers the driver will both pay. If the driver himself didn’t have insurance but he was a member of a household that had auto insurance, then they can be made to pay also. This can arise for example when a young man whose parents are divorced is driving his father’s vehicle but lives with his mother. In causing your injuries, he has exposed both of his parent’s insurance companies to payment of your claim.
OPTION THREE: OTHER DEFENDANTS:
Next, is there another possible defendant? Can the accident be blamed on yet another vehicle? Unsafe road conditions? Improper signage? Improper safety measures by a road construction company? Or, were your injuries partly caused by a failed airbag? Did your vehicle fail crashworthiness standards? Was the at-fault driver’s vehicle made unsafe by a mechanic or tire installer? All of these questions can present other options for an attorney to pursue to make you whole again.
LAST DITCH OPTION: GET DEEP DISCOUNTS FROM MEDICAL PROVIDERS
If there is no other source of money, you are left with a Hobson’s choice – a take it or leave it situation. In that case, the wise move is usually to take the $30,000.00 and have your attorney get deep discounts from lien holders and medical providers. Just like you, lien holders would like to get something rather than nothing. I have gotten six-figure hospital liens cut to five or six thousand dollars in order to be able to settle a case.
The sad reality is that in most cases of serious injuries there is never enough money to go around. Rare is the case where the at-fault driver is heavily insured or was in the course and scope of employment for a big company that can afford to pay a big settlement. A personal injury attorney’s main goal should be to put at least some money in his client’s pocket. My guarantee to all my clients is that I will never make more than them. I will cut my fee as much as it takes so that my client gets at least one dollar more than me. The end result for the client is still not fair – suffering serious injuries and coming away with a few thousand dollars is not at all how the system should work – but it is the best outcome considering all the circumstances. If your attorney has pursued every possible option, he can at least have the satisfaction that he did everything he could for you.
Law Offices of Robert Rodriguez