Who pays?

[ribbert]

Today I came across a term I was unfamiliar with, "proof of financial responsibility" in the context of driving a vehicle in the US. I see now it's basically insurance (or bond) to cover third party personal injury and property damage in an accident where you are at fault.

What I don't understand is how that can be capped. In Missouri for example (I believe each State has it's own laws governing this), you are only required to be insured for injury to a max of $25k per person / $50k total per accident. This is a drop in the ocean when it comes to personal injury. Who picks up the cost beyond that? Long term hospitalization, numerous surgical procedures, long rehab, permanent disability, 24/7 care, loss of income, pain and suffering (that's a formal term here), multiple victims, this would run into many millions with some, if not all of these circumstances that are so tragically common.

A nasty leg break needing a few ops, rehab and a couple of months off work, even with a full recovery would come to way more than $25k.

So, could someone please explain this to me, thanks.

Noel

NB. I believe the new helmet law in Missouri also prohibits Police from pulling over motorcyclists for the express purpose of verifying their eligibility to ride without a helmet, that is, proof of age, proof of insurance for fear they may, amongst other things, flee and result in a pursuit or running them off the road. Ironically, they acknowledge that chasing a helmetless rider increases their risk of injury. WTF!

[red]

Today I came across a term I was unfamiliar with, "proof of financial responsibility" in the context of driving a vehicle in the US. I see now it's basically insurance (or bond) to cover third party personal injury and property damage in an accident where you are at fault.
What I don't understand is how that can be capped.
A nasty leg break needing a few ops, rehab and a couple of months off work, even with a full recovery would come to way more than $25k.
Noel

Noel,

I'm no expert, but liability beyond the insurance caps will probably be on the head of the guilty party.  States may have a fund that can jump in and help to pay,  but don't expect that, even if the state fund exists in your state.  Like the insurance companies, the state fund will be in the business of denying claims.  FWIW, you can get insurance with much higher limits for some extra money, not too much; see your insurance agent for that option.  It's not just liability limits, either.  If your insurance covers your injury costs too, those limits can be raised also.

The state-required insurance caps are not much, as you say, but unlimited insurance policies would cost everybody a lot more.

It would take a court judgement, a successful lawsuit, to extract the needed money (beyond the insurance caps) from the guilty party, as I understand it.  A lot of people seem to think they can just declare bankruptcy and walk away whistling from a high-dollar court judgement, but after the bankruptcy settles all other debts, the bankrupt guy still owes the FULL amount of the court judgement to the victim.  If the guilty party really can't pay immediately, the court will set up a monthly payment schedule (an annuity) to extract that money from the guilty party for the victim, backed by the force of law.  There are vulture businesses which will purchase those annuities from the victim for a cash settlement, usually a small percentage of the annuity totals.  

Check your local laws, of course.
.

[carey]

If I understand my policy, the cap is what they will pay, the rest is on me.  In PA, there is a minimum coverage amount required, but the minimum won't go far.

[Millietant]

That's just the insurance companies limiting their exposure if you have an accident Noel, just to ensure they are able to limit their liability for extortionate medical care costs and ensure they maximise profit. Meanwhile Ambulance Chasing law firms have a booming business in the US (thankfully far less prevalent, although we do still have it to a degree, here in the U.K.)

It sort of means, "you're insured, but not insured".

Also, thanksfully, because of our NHS system, it's not something we in the UK be to worry about generally - but it is a significant factor in travel and holiday insurance costs once we leave the UK.

What Americans have to put up with in terms of "insurance" cover (or lack of it) is criminal in my mind. Our legal minimum cover means that any person or property injured/damaged in an accident caused by a rider/driver, is covered for that loss/damage/injury, but the rider/driver are not covered for their own injuries/losses (called Third Party Only insurance). That's the only way some young people (or high risk drivers, those with poor accident histories and infractions) can get insurance, especially on high value/high performance bikes - that's why most PCP schemes (where you never actually own the bike, but lease it over a couple of years) stipulate that you must have Fully Comprehensive cover in place for the bike.

My (American) brother in law paid £300 to have 2 weeks cover on a people carrier/minivan he hired when he came with the family for a holiday and because he had a US driving licence, they would only allow him to hire an automatic car (we have selarate tests and licences for drivers who can't drive manual/stick-shift vehicles).

[ribbert]

Thanks everyone for the feedback. I understand that the insurers are limiting their liability to the cap, I get that, but my question was, who pays for costs in excess of that cap, $25k is nothing when it comes to personal injury.

Saying the balance falls on the at fault driver is great in theory but in practice, just who could possibly pay it? the average American household savings are $2000 and lives largely hand to mouth, as is the case with most first world countries.

Given the scale of things in the US, surely you don't have millions of victims owed billions of dollars by folks who in any given week wonder how they're going to pay for next weeks groceries.

If I'm put in a wheel chair for life by a kid running a stop sign, who pays my medical bills and compensation if the personal injury claim is capped? That was my question.

Red and Carey have both said they believe any claim in excess of the cap falls on them. In any given year there must be thousands of accidents where associated costs run into many times the value of your house, retirement fund and ability to service debt, how does the possibility of that not concern you, or if on the receiving end, who's going to pay your bills if you can't work any more.

The system as described can't possibly be right. Anyway, I won't pursue this here anymore, thanks to those that answered.

Noel

[gdfj12]

Noel,

I think that the $25k\$50k limits are usually the minimum required coverage you would need to carry. I believe that is how it is here in Michigan where I live. I don't have my limits that low and I don't recommend anyone else go  with the lowest limits because if there is an incident and a victim goes after your ins. co. and can only get $25k/$50k, they will come after you for the rest that they want. If you have much higher limits them the ins. co. lawyers can do their job of settling with the victim for <\= your liability limits.

Also, check with the ins. agent to make sure you have adequate coverage for yourself in case the other person is at fault and has the minimum or no liability coverage, then at least your ins. co. should cover you and then go after the other person for compensation. Here in Michigan they call that uninsured\under-insured coverage.

George

[ribbert]

Noel,

..... if there is an incident and a victim goes after your ins. co. and can only get $25k/$50k, they will come after you for the rest that they want.....

George

Thanks for that George, but that's the whole problem, $50k wouldn't even scratch the sides of a serious personal injury. Roughly speaking a fatal injury costs over a million dollars and serious injury just under half a million dollars average. This amount is beyond almost everyone's capacity to pay. I imagine even people like yourself opting for higher limits are still not going to be in that league and those numbers are averages, the potential is there for costs running into the many millions from a single accident.

Coming after you for it if you haven't got it isn't going to pay the bills.

Thanks for the input.

Noel

[gumby302ho]

That's just the insurance companies limiting their exposure if you have an accident Noel, just to ensure they are able to limit their liability for extortionate medical care costs and ensure they maximise profit. Meanwhile Ambulance Chasing law firms have a booming business in the US (thankfully far less prevalent, although we do still have it to a degree, here in the U.K.)

It sort of means, "you're insured, but not insured".

Also, thanksfully, because of our NHS system, it's not something we in the UK be to worry about generally - but it is a significant factor in travel and holiday insurance costs once we leave the UK.

What Americans have to put up with in terms of "insurance" cover (or lack of it) is criminal in my mind. Our legal minimum cover means that any person or property injured/damaged in an accident caused by a rider/driver, is covered for that loss/damage/injury, but the rider/driver are not covered for their own injuries/losses (called Third Party Only insurance). That's the only way some young people (or high risk drivers, those with poor accident histories and infractions) can get insurance, especially on high value/high performance bikes - that's why most PCP schemes (where you never actually own the bike, but lease it over a couple of years) stipulate that you must have Fully Comprehensive cover in place for the bike.

My (American) brother in law paid £300 to have 2 weeks cover on a people carrier/minivan he hired when he came with the family for a holiday and because he had a US driving licence, they would only allow him to hire an automatic car (we have selarate tests and licences for drivers who can't drive manual/stick-shift vehicles).


     Well in Canada if you came over here before long you can drive anything you can afford, stick or auto and on the opposite side of road as well as shifter! I know I wouldnt be treated the same I dont think across the pond but maybe thats a good thing. Fuck Ins companies.

[Millietant]

I thought it was already like that. We've regularly visited family in Brockville ON and hiring a car has always been just a matter of what we can afford, no restrictions on size, gearbox, or anything else, other than paying extra if the hirer/driver is under 25 years old.

Over here, if you can't use a clutch and gearbox properly, you can't get a licence to drive a manual gearbox car - hence where drivers have licences from countries that don't require the driver to be competent with a manual gearbox, car-hire companies won't allow them to rent a manual (have to have a "valid" licence to drive or insure one).

[Motofun]

If you have a motorcycle endorsement does that qualify to rent a manual?

[Millietant]

Nope - sorry, but on the bright side you CAN rent a motorcycle to ride....in our beautiful weather, on our quiet, almost uninhabited roads 

[Bill_Rockoff]

where drivers have licences from countries that don't require the driver to be competent with a manual gearbox, car-hire companies won't allow them to rent a manual (have to have a "valid" licence to drive or insure one).

I rented a manual-shift car in the UK a few years ago. I don't recall any constraints at the rental counter. I think they asked "you can drive a manual shift, yes?" but I don't think anyone asked "....but are you any good at it?"

Amusingly, I kept trying to shift as if I were expecting a mirror-image shift pattern. "First gear is close to my leg and forward. No, wait... that's 5th." It took a couple days to get used to that, and a couple more to get used to multi-lane junctions and roundabouts where I had to think hard about which lane was mine.

A motorcycle's room on either side in my (narrow) lane would have been nice on the smaller roads, where oncoming traffic always seemed like I was about to lose both mirrors at once. But my wife is an uneasy passenger on a motorcycle under the best of circumstances, and the A and B roads between Edinburgh and London were strenuous enough in a car. 

[Millietant]

I'm surprised there were no questions Bill, it's something that is at the top of the list now whenever our US family members visit (which until 2020 was quite regular) - most car hire places are well aware that drivers must have the correct categorisation of licence, otherwise in the case of an accident, the hire firm could be liable for third party claim costs for not doing their due diligence for the hire.  Maybe that's a more recent development now that we've adopted the more modern "it's never my fault" culture