Are You Covered?
As you’re turning into your driveway with your boss’ car during your lunch break, you collide with your spouse’s car which is parked in the driveway. In your panic, you hit the gas instead of the brake and drive through your garage door, hitting the next-door neighbor who was inside finally returning your leaf blower. Suddenly, your thankful that you’re covered through Sumners Insurance and you call us to report a claim. Now what?
Step 1: What Policies are in play?
Let's list the policies we might need: Your auto policy, Your umbrella policy, Your boss' auto policy, Your boss' umbrella policy, Your neighbor's auto policy, Your neighbor's umbrella policy, Your homeowners insurance, Your employer's Workers Compensation, and Your neighbor's health insurance.
That's right, there are NINE insurance policies, possibly with NINE different companies, NINE deductibles, NINE adjusters...
That's right, there are NINE insurance policies, possibly with NINE different companies,
NINE deductibles, NINE adjusters...
Step 2: Narrow that down
Start with the easy ones: any Worker's Compensation policy doesn't apply because (1) you're not injured, and (2) you're not performing work duties because you're on lunch, and (3) your neighbor isn't employed by your employer, so Workers Compensation is OUT. Your neighbor's health insurance will pay, but then collect (subrogate) from other insurance in force. That leaves THREE auto policies, THREE umbrella policies, and ONE homeowners policy in force. Let's explore the damage and injuries.
Step 3: Determine liability (who is at fault)
This is pretty easy. The damage to both cars is your fault. We'll assume your neighbor had permission to be returning the leaf blower. His injuries are your fault as well. Sorry.
Yes, it's your fault.
Step 3: Damage to your boss' car
The next time your crazy friend asks to borrow your car, remember this: any insurance held by the vehicle's owner is primary, and any insurance held by the driver is secondary. You have a difficult phone call to make - you have to call your boss, who we'll name "Bud", and tell him to turn in a claim on his auto insurance. The full coverage (comprehensive and collision) he has on his personal auto policy responds to repair his car.
Step 4: Damage to your spouse's car, and your home
Here's where most people are surprised. YOU CAN'T BE LIABLE TO YOURSELF! Bud's personal auto policy says that anyone that drives the vehicle, like you, is an insured, and the policy covers losses caused by insureds. Since an insured can't be liable to himself/herself, the damage you caused to your spouse's car and your garage door ISN'T covered by Bud's policy because you're an insured.
Fortunately, damage to your spouse's car is covered by your personal auto policy with collision coverage, and damage to your garage door is covered by your homeowners policy, which covers damage by vehicles. The part that everyone groans about is that now you have TWO deductibles to satisfy. That's better than no coverage, though, right?
You can't be liable to yourself!
Step 5: Injuries to your neighbor
To further complicate the situation, your neighbor broke his neck, sprained an ankle, and suffered a concussion that may lead to lifelong difficulties. Even though it took him forever to return your leaf blower, you still feel terrible, and YOU'RE responsible for his injuries. Remember, Bud's insurance policy is primary, and yours is secondary. The bodily injury liability limit on Bud's auto policy will be exhausted first (this can be as low as $20,000 in Iowa).
Once Bud's policy is exhausted, Bud's personal umbrella is next. Then, Your Personal Auto Policy's bodily injury liability limit is used, and finally, your personal umbrella steps in.
After these four policies are exhausted (we're talking $2.5 - 3 million dollars), your neighbor's personal auto policy reponds with underinsured motorist coverage to cover his outstanding medical bills. Underinsured/Uninsured Motirst coverage covers him as a pedestrian. If he has a personal umbrella policy with Underinsured Motorist coverage, it reponds at last.
The amount of insurance available for your neighbor's injuries could be staggering ($7.5 million or more) or very minimal if everyone "chooses their own price" (as little as $40,000). While you don't have control over other people's insurance, you do have the option to properly protect yourself.
Until next time, stay covered!
While you don't have control over other people's insurance, you do have the option to properly protect yourself.
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