Automobile Insurance

The most common injury claim we deal with is an automobile accident claim. Given that almost everyone has been in an automobile accident during their life and that automobile accident insurance is mandatory it is surprising that many people don’t know what they are buying and paying for when it comes to automobile insurance.

Let’s start with the fact that in Nevada and Arizona, we have what is called a fault-based insurance system. That means that if someone causes an accident and hits your vehicle, you are allowed to pursue their insurance. In other words, the person who is at fault for the accident covers the loss. This might seem logical, but many states have adopted a no-fault insurance system in an attempt to streamline and make the payment of automobile claims easier. Under a no-fault system you insure yourself and your own automobile. Then when you get in an accident, regardless of who is at fault, your own insurance has to pay (up to certain limits, after which you may be able to sue the other driver still). The promise with no-fault insurance is that it reduces bickering over who is at fault for the accident and provides the driver with a quick financial remedy. Also, if you think about it, a fault insurance-based system requires you to insure the entire world except yourself. Under a fault-based system you must purchase liability insurance for the situation that you caused an accident and hurt another person. However, the law does not require you to purchase insurance to cover yourself if you are injured in an accident someone else caused. There are both good and bad aspects to fault and no-fault insurance systems. But for the purpose of this article, we’ll talk about the different coverages that are available for fault-based insurance.

Nevada and Arizona require all drivers to have liability insurance coverage in a certain minimum amount. For Nevada, the minimum bodily injury liability amount changed effective July 2018 to $25,000 per person and $50,000 per accident. For Arizona the minimum amount is $15,000 per person and $30,000 per accident. These are the minimum policy limits for bodily injury—you can always (and should) buy more. For property damage, like damage to another vehicle or a utility post you may have hit on the side of the road, that has its own policy limit. In Nevada the policy limit for property damage is $20,000. In Arizona it is $10,000.

You often see insurance policy limits written as something like “25/50/20.” The first two numbers are the bodily injury per person and per accident policy limits in thousands of dollars. The third is the property damage policy limit in thousands of dollars. In case the bodily injury per person and per accident limits are confusing to you, imagine that you were involved in an accident and had $25,000 per person/ $50,000 per accident policy limits. You struck another vehicle and there were three occupants who were all injured. The most your insurance will pay for any one of the people injured is $25,000. But the total, aggregate amount paid out for the accident cannot exceed $50,000. Therefore, if each of the people suing you had a $25,000 claim, you would be underinsured because the total amount of the claims would be $75,000 ($25,000 x 3 people) but your per accident policy limit is only $50,000. It is not an uncommon scenario that people do not carry enough insurance to pay for all the damages caused in an accident when
several people are hurt. In these situations, settlement for the policy limits is common because pursuing a person personally for amounts in addition to or in excess of their policy limits is a long and sometimes difficult process.

We’ve spoken about what the minimum policy limits are. But not everyone carries the minimum policy limits. It’s common to see people have bodily injury policy limits of 50/100, 100/300 or 250/500. Occasionally you will see a million-dollar policy limit, but these are exceptions rather than the rule for
an individual driver. If the vehicle involved in the accident is a commercial vehicle, like a dump truck or a semi truck, a commercial vehicle is typically covered for no less than $1,000,000. This reflects that the vehicle is owned by a business with more assets to protect and that these larger vehicles are more likely to seriously injure someone in the event of an accident. Of course, if it is a very large company like Walmart or Fed-Ex who operates the commercial vehicle, these companies will have insurance but they also
have ample assets to pay any verdicts that would exceed the insurance coverage. Essentially, bodily injury policy limits are not a concern with large companies of this kind.

When we interview clients, we often ask them about their own insurance even when the other driver is at fault. Surprisingly, many clients don’t know what kind of insurance coverage they have purchased for themselves. It is an important question to ask. Often, clients respond that they have “full coverage” but do not really know what that means. Frankly, we can’t tell what it means either because it means different things to different people. In our experience however, “full coverage” often means the same as
“minimum coverage.” It is a selling point by an insurance agent to tell the person that they have all the coverage that the law requires. However, minimum coverage alone is not a good idea.

One of the first questions we have to ask clients is whether they have any uninsured/underinsured motorist coverage. This is often abbreviated as UM/UIM coverage. By state law, every person who buys an automobile insurance policy must be offered to purchase this additional coverage. Buying the coverage, however, is not mandatory and may double your premiums. However, it is very responsible to purchase this coverage on your own policy because this is insurance for you in the event that someone else causes an accident but was uninsured or carried policy limits that are not sufficient to pay for all of your damages. We’ve seen many cases where unfortunately a person was killed and the person causing the
accident carried only the state minimum amount in insurance. It is a good idea to carry UM/UIM coverage for at least the amount of liability insurance you purchased.

Another type of coverage is called med pay or PIP coverage. PIP stands for Personal Injury Protection. The two terms mean the same thing, it is simply that it is customary in different states or different parts of the country to use one term and not the other. This coverage often has a limit of $2,000, $5,000 or $10,000. It is a type of no-fault insurance that will pay for any doctor and medical bills if you have to go seek medical treatment following an accident. You are not required to purchase this coverage by law and many people waive it. If you have good health insurance, there is not a strong reason to purchase this coverage because you can always seek medical care through your health insurance. However, if you purchase this coverage it is to your advantage to use it rather than your health insurance. While health insurers may have to be repaid under a legal process called subrogation, state laws typically limit the right of automobile insurers to subrogate med pay or PIP payments. This means that you both get your medical expenses paid and you get to keep any amount you get from the other at-fault party for payment of those bills.

Another aspect of automobile insurance that many people do not understand is that you do not necessarily have to be the person purchasing the policy (a named insured) in order to be covered by it. If you have the permission of another person to drive their automobile, most commonly you are covered by their policy just as that person would have been. Also, it’s not unheard of for several related people living in the same household to have their own, separate automobile insurance policies. This might happen if you’re living with a parent or a sibling who is an adult and has their own automobile and automobile insurance. Depending on the language of the policy, their policy may also cover you and your vehicle. Policies typically try to avoid this effect or what is called the stacking of multiple policies in the same household. Nevertheless, some coverage can be found.

Another thing we will mention because we do a lot of business in Las Vegas, Nevada is rental car insurance. There are many rental cars driving around in any city, but especially in tourist destinations like Las Vegas and Phoenix. Often the driver of a rental car is covered not only by the rental car company’s insurance but also by their own policy. At one time, it was frequent for personal auto policies to exclude coverage if you were driving a rental vehicle, but today the opposite is true. Rental car companies have
to provide state minimum insurance coverage on older vehicles, even if the renter declines supplemental or additional insurance. As a matter of policy, the state has decided that it is too risky to allow a rental car company to put hundreds or thousands of vehicles on the highway but not provide a guarantee of minimum insurance coverage for those vehicles. Often the vehicles are self-insured as part of a pool of vehicles rather than through a traditional automobile insurance company such as State Farm or Geico.
Nevertheless, if you are involved in an accident with a rental vehicle, coverage available through the rental car company needs to be explored.

Perhaps the last type of insurance or coverage worth mentioning is an umbrella policy. If you own a home, you can often purchase an umbrella policy that will supplement or add to the policy limits of both your
automobile insurance and your homeowner’s insurance. This is responsible insurance to have for anyone who has several assets or automobiles. Umbrella policies typically carry a limit of $1,000,000 or more.
Hopefully this article has helped you understand some common insurance issues we deal with. As always, call our office right away if you have questions about your legal rights.