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My thoughts on it all

Oh really?

May 5, 2006 — As an auto insurance adjuster, I have to say that I work with a lot of people/customers who are ignorant of the function of insurance and claims handling. In order to get through the claims process I have to clear this all up. For example, people assume that since they have collision coverage, a rental is covered. Or they assume that since they have an insurance policy, they are "fully covered". This usually means I have to take the time to define the coverages on the policy and what exactly they do and do not cover. (Often repeating this several times.)

I was speaking with an insured this morning who told me, plain and simple, that since California law indicated he was at-fault for his accident, it is our duty as his insurance company to change the meaning of that law. "Oh really?" was my response, after which I muted the call and laughed my head off. He said yes, regardless of what the law says, "whoever is moving first should have the right of way".

Just for clarification purposes - I don't pretend to be a know-all myself, I didn't know anything about auto insurance until I became an adjuster 3 years ago and I'm still learning new things every day. I'm just amazed how far ignorance of this whole area can go for some people. I'm curious if anyone here has misconceptions about insurance or claims handling - and whether they are much the same as the ones I deal with on a daily basis.

Dylan says:

Thankfully there has only been one time I've had to deal with my car insurance from a claims standpoint. And also thankfully, everything was being covered by "the other guy".

But maybe I do have a question...

The incident above happened at a stoplight. I was stopped at a stoplight and the car behind me slammed into me and I was punched forward into the bumper of the car in front of me (despite being at a full stop, and with an "okay" distance between me and the car in front of me). Well, it turns out that I was the fifth car in a chain reaction hit. Some guy hit a Suburban four cars back of me, but hit hard enough that it propogated through "Newtonian-style" all the way to me hitting the car in front of me. When all was said and done, after the police officer showed up and got everyone's story, the fault of the entire thing landed on the guy who originally hit.

Now, I had heard that when something like this happens, it's actually treated as six separate accidents and the insurance company would then consider that I had an accident with the person in front of me, as opposed to just being part of the whole thing. And that's how it worked in terms of how the insurance companies paid each other. (My insurance company was contacted by the insurance company of the person whose car I hit, and my insurance company talked to the company of the person who hit me, and so on.

But, supposedly, because the entire chain reaction of accidents was deemed the fault of the original guy, the accident doesn't even show up on my record as an accident. Normally it would, but the original guy was going so fast that it changed the situation, according to the police officer. That original guy ended up having to pay for everyone's damages. (OUCH!)

Is that how it normally works? Or was I just lucky in the fact that it wasn't noted as an accident on my record?

Jackson says:

Wow - that guy was going pretty dang fast to cause a 6-car chain reaction. I've gotten a 5-car chain reaction, but it was on the freeway.

It's not unusual for insurance companies in the accident to contact every other insurance company involved. In the case of a rear-end chain reaction you want to know how many impacts each person felt - because a clean chain reaction by one party usually causes 1 impact for everyone else. If you'd rear-ended the person in front of you first, and then were pushed into her by the person behind you, the person in front of you would've felt 2 impacts. This is an important detail when determining liability (fault).

I've never heard of a single accident (chain reactions included) being treated like separate accidents by insurance companies, however, it could seem like there are 6 claims since there are 6 companies involved. Here's what probably happened:

The person who was liable for accident (we'll call him Bob) has a limit to the property damage liability his insurance company can pay out for all claims made in one accident. Lets say, for the heck of it, that his property damage limit in the case above was $20,000. That means Bob's insurance company has no obligation to pay more than $20,000 for car damages to the 5 cars involved - and honestly that's really not enough money. Besides the obvious cosmetic damage, there is usually mechanical damage as well. These 5 car owners have two different options. #1 - they can all try to go through Bob's insurance directly for their damages. Since there is a limit, Bob's company has to wait to get the information on all damages to all 5 cars before it can settle anyone's claim. This means all 5 cars may have to wait several weeks - even months - before getting ANY money from Bob's insurance. They may not even get enough money to pay for all the damages to their car since there is a limit issue. (i.e. lets say all cars had $5,000 in damages each - that's $25,000 total, but the limit is $20,000 so they'd each have to settle for $4,000.) Option #2, each person goes through their OWN insurance company, who pays to handle all of the damages on their insured's car, and then sends a "subrogation demand" to Bob's company. There are still going to have to be settlements made and releases signed, but at least the 5 parties get their cars fixed much faster.

Different states have different rules about accidents ending up on records, but it seems that the majority of them agree that only at-fault accidents must be declared on driving records.

rnewhouse says:

Here's how it works in Oregon:

I was the fourth car in a five-car chain reaction last September. The woman who started it all, Melissa, drove off before anyone even realized she was involved... it wasn't until we all went and looked at the back of the car at the "end" of the line that we discovered the tail end was all bashed in.

Now, Melissa was stupid enough to drive home, and call the cops to report a "hit and run" that happened TO her, at exactly the same time and place as the accident that left four other cars disabled. I mean, the same lane, same milepost, everything. Obviously she was the originally hitter.

ALL the claims went to her company ultimately. However, my company paid for my repairs, then subrogated her company. Her company will also pay my deductible because it was her fault and not mine. All the other guys had their companies pay for their damages, and they all subrogated Melissa's company. Now, of course Melissa doesn't have enough coverage to pay for all this damage, so I may not get all of the deductible, and my company may not get all of its payments to me reimbursed, but hey, that's what I pay them for.

Note: The claim to Melissa's company is still pending, because after all the dust settled, she changed her mind and is now claiming she wasn't even there that night. Ha.

Jackson says:

This is basically how it works in California as well. Hopefully the police will prosecute her for a hit-and-run.

I'm not surprised that she ran and then freaked out and did something stupid like calling the police and saying she was the victim - I have three similar claims. The police in California often ask "Why did you leave the scene?" because most TRUTHFUL victims don't leave the scene prior to calling 911. The ones that call from home or go to the station the next day have often turned out to be the at-fault parties.

Some insurance companies, when they have to settle for an amount less than their full damages (like when there is a limits issue), will "make the insured whole" and take the hit on the amount unrecovered. In other words, they will give their insured the full deductible back. Other insurance companies prorate the settlement and give only that prorated portion of the deductible back.

What sucks about Melissa's new claim is that her insurance company has a duty to protect her by fully investigating the claim, even if she's obviously changed her story and is lying. If she is daring to claim that she wasn't even there that night, a "counter report" from the police (i.e. not taken at the scene) would indicate she had called in to report the accident occuring at such and such time and place, and they'll match it with the scene report for the other 4 cars and the damages to her car. (Wow, she really is thick to think that the damages and reports aren't going to rat her out). But her insurance company has to get ALL of the evidence now or else Melissa could try to pursue a Dept of Insurance complaint against them for not fully investigating the claim, or even try to pursue a bad-faith claim in court against them.

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