[SAEalumnus]

As it happens, I work for one of California's larger auto insurance companies as a claims adjuster and have adjusted in excess of 1,000 claims in my tenure with my current employer. Since I deal with situations such as the one in which you currently find yourself, I hope I can be of some help.

1) After an accident is reported to an insurance company and the report is subsequently routed to a claims office and assigned to an adjuster, the adjuster begins his/her investigation into three areas: coverage, then liability, then damages... in that order.

Coverage questions arise when you let someone (a friend, say) not listed on your policy operate your vehicle, or when the vehicle itself is not listed on your policy (eg. a rental car), or whether or not you have paid your premium. There are other questions of coverage that could also come up, but these three are by far the most common.

If you don't pay your premium for a given month, your insurance will be cancelled immediately at the end of the last term for which you did remit payment. Auto insurance provides no grace periods. Turning in your premium payment late will generally result in a reinstatement of your policy, but such reinstatement will not take effect until the money is actually received by the insurance company, and if you've had an accident in the meantime during the lapse in coverage on your policy, you're just plain SOL. Even if you are 100% at fault for an accident and even if the lapse in coverage was less than one day, if the collision occurs during the lapse, the insurance company won't pay a dime, nor will they defend you if the person you hit files suit.

This is what happened in your situation. The policy belonging to the person who hit you was cancelled (very likely due to non-payment of premium) and was not reinstated prior to the time your accident occurred. In effect, the other person became an uninsured motorist.

Liability is determined by taking statements from as many involved parties as can be reached, inspecting vehicles (physical evidence), and by collecting any other available information (eg. a police report). Liability isn't always entirely any one person's fault. In fact, most accidents are a result of what's referred to as 'comparative liability,' meaning more than one person contributed to the cause of the collision, though not necessarily to an equal extent.

Assuming any issues of coverage have since been resolved favorably, an insurance company will only pay for that percentage of the other party's (the "claimant's") damages for which they believe their party (the "insured") is responsible. If the case turns into a liar's contest with conflicting statements and no conclusive evidence to support either party, the default position (by contractual obligation - the auto policy itself) of any insurance company is to defend it's own insured. As my manager frequently states: "The duty to defend is greater than the duty to indemnify."

Damages are usually grouped into two broad categories: property, and bodily injury. Property damages are evaluated from estimates and photographs, injuries are evaluated to some extent from the 'reasonable' medical bills incurred by the injured party, and in party from an evaluation of the extent to which they are likely to be injured from the specific set of circumstances surrounding the accident in question.

Sometimes even if an insurance company accepts liability on behalf of their insured (let's say their insured rear-ended the claimant), just because they will pay the claimant's property damage does not necessarily mean they will also pay an injury claim alleged by the claimant. All too frequently people involved in a collision, either accidentally or otherwise, seek to supplement their annual income by submitting an exaggerated injury claim to the other party's insurance company. Depending on the extent to which the claim of injury and subsequent demand for a specific settlement amount, the insurance company is likely to react in one or more of a few ways:

- If the claims is only very slightly questionable, the insurance company will more then likely pay you off to get you to sign a release form which then legally prevents you from filing suit against the company or its insured to try to get more money; or

- The file may be reassigned to a low/minimal impact adjuster who will either offer you a very nominal amount, or request a scientific/engineering opinion as to the speed of impact and use the report as grounds to deny your claim, believing the collision was insufficient to produce any injuries; or

- In an extreme case, the file may be referred to the insurance company's special investigation unit to be evaluated for possible insurance fraud. Sometimes cases of blatent insurance fraud are paid anyway in the course of building a case against known criminals. In order to obtain a conviction of insurance fraud, one or more fraudulent claims must have actually been paid.

2) One all claims for damages (property and bodily injury) have been either paid or denied according to the liability decision made by the adjuster, the next step for the insurance company is to attempt to seek reimbursement for any money they paid out on their insured's (or others') behalf for which someone other than their insured was liable. The process of an insurance company seeking reimbursement from either another insurance company or from an uninsured motorist is effectively collections and is referred to as 'subrogation.'

The only problem with subrogation is that an insurance company can only subrogate (seek reimbursement) for money the company has *actually spent* and no more. If the insurance company doesn't spend any money (or if their insured is entirely at fault), then no subrogation potential exists.

If you're involved in a collision where there is reason to believe that the other party is at fault, you generally have two options: you can have your own insurance company repair your vehicle first, then subrogate against the other party's insurance carrier later; or you can attempt to pursue your claim directly through the other party's insurance company. Both methods include advantages and disadvantages.

The former method has the advantage of getting your vehicle repaired immediately (assuming you've purchased the appropriate optional coverage, such as collision, comprehensive, or uninsured motorist property damage, as the case may be), but has the disadvantage that you will likely have to pay your collision deductible up front to the body shop, and will then have to wait for your insurance company to get your money back from the other carrier before you get reimbursed.

One common misconception about a collision deductible is that you should not have to pay it if the accident is not your fault. While I agree with the sentiment, a collision deductible is self-insurance and is a 'no-fault' coverage, meaning it applies regardless of who is or is not at fault. Some of the largest insurance companies have a clause in the auto policy that waives your deductible in the event you're not at fault, but the reality is waiving a deductible carries a substantially higher cost for the insurance company to bear, meaning your premiums would have to be increased dramatically (in the case of the smaller companies) to balance the expense.

The later method (going through the other party's carrier) has the advantage that if the other company accepts liability, they will pay your claim without you having to pay any kind of deductible. The disadvantages are two-fold. First, you'll have to wait for the other insurance company to conduct its investigation which can take anywhere from days to weeks depending on the circumstances. Second, even once their investigation is complete, the other party's company may decide that they believe you are also partially (or entirely) at fault and will only offer to pay for that percentage of your damages for which they believe their party is responsible.

Sometimes the insurance companies involved don't agree on the extent to which the parties involved are at fault. In these cases, liability is either negotiated by the adjusters, or the files could be submitted to inter-company arbitration, the decision from which is binding on the insurance companies involved whether or not they like it. Arbitration, however, is not binding on the involved parties themselves.

3) In the case where your insurance company is not able to recover for you all of the damages for which you believe yourself to be entitled, either because of an unfavorable arbitration result, or because they couldn't issue payment on your behalf since you didn't have the appropriate coverage on your policy to allow them to do so, you still have a right to recovery. In California, the statute of limitations for actions (lawsuits) involving claims of property damage only is three years from the date of the accident. If your claim includes bodily injury, then the statute as of January 1, 2004, is two years from the date of the accident.

In your specific situation where the other party became in effect an uninsured motorist due to a cancellation of their policy and since your insurance company has no right to subrogation because you do not carry any collision or uninsured motorist property damage coverage on your policy (if you have either Collision or UMPD, your insurance company can help you), then your one and only choice if you intend to pursue your claim is to file suit against the registered owner of the other vehicle.

DO NOT include the name of the other party's insurance company in your lawsuit because your case will be dismissed and you will have to refile your suit and pay another filing fee. Be prepared to show documentation (i.e. estimate and/or photos of the damage, witness statements, etc.), but be also aware that in small claims court, only the 'parties to the action' (you, the other driver, and any witnesses) will be allowed to address the court: no attorneys and no insurance adjusters. If liability is clearly in your favor and if you've properly documented your damages, your odds of winning are good.

I hope this helps, and if you have any questions, please feel free to PM me. Good luck!