Every State in the Union requires individuals to show financial responsibility in order to be privileged to drive on public thoroughfares. They also establish the minimum dollar amount in order to register their vehicles. Most of the consuming public meet that legal requirement by purchasing an insurance policy for the minimum established by regulation. This then becomes what will be referred to in your policy as bodily injury liability/property damage.

The debate continues as to minimum amounts required by law and amounts more in line with actual expenses arising from an occurrence. Some States have limits as low as 25,000 bodily injury and 15,000 property damage limits. This raises the question, why should a person who becomes injured through no fault of his own have to suffer financial destitution because the offending party meets minimum requirements and then walks freely.

Hold Harmless Agreement and Subsequent Action

It is important to note that an insurance company by contract agrees to represent you only if they feel there is a legal ramification of your action. They are not required to represent you just because you feel a moral obligation to an occurrence. The insurance company will use a hold harmless agreement signed by you to investigate an alleged claim before making a decision as to whether they will now stay as your representative or deny the claim leaving you to determine the course of action you may want to take. By denying a claim before appropriate investigation has occurred leaves the insurance company open to a breach of contract so they don’t take the route of denial lightly.

The cost of the investigation is outside the limits of liability you purchased, so again the economy of scale begins to play a factor in the claim settlement. The company may feel you are not liable; but it may take more resources, time, and money to prove that so they will settle the claim and move on.

The insurance company also meets its legal contractual requirement when the limits of coverage purchased have been exhausted.  If a claim hasn’t been settled satisfactorily by then, the recourse left to the injured party is to try on their own to collect for damages or go through expensive legal proceedings with the hope of receiving financial remuneration. Realizing that you as the insured party can still be held for damages in excess of policy limits should be a consideration in determining how much coverage to purchase. This factor is one thing which motivates many to purchase additional amounts just to protect their “brick and mortar” assets. Not may have liquid assets waiting in reserve for settling insurance claims so payment of premium becomes the viable way to handle future loss. Having said that, there are many who feel they have a certain social responsibility for their actions to purchase limits which would come closer to reimbursing for life value lost due to their negligence.

A point of interest to me is the observation that many will hasten to provide large amounts of money in the event of payment due to negligence for another injured party and yet will resist providing the same amount for their own surviving heirs in the same event. Still working on that one.

Summary of Liability

In short, bodily injury generally means physical injury to a person and any resulting sickness, disease, or death. This coverage is activated by action on the part of the insured which causes harm to another person outside insured vehicle, i.e. occupants of another vehicle, pedestrian, cyclist, or occupant in insured vehicle who is injured by actions of insured, i.e. excess speed, recklessness, driving while impaired from drugs or alcohol, etc.

Property damage liability is meant to cover injury to or destruction of tangible property, including resulting loss of use. This coverage is a little easier to deal with because the property damaged or destroyed usually has an established monetary worth prior to the loss. Medical coverage gives a way for the insurance company to pay for smaller medical claims brought against an insured without having to go through extensive investigation to determine negligence.