Can You Sue Someone After Settling With Their Insurance for a Car Wreck?
People purchase liability insurance to protect them from claims and lawsuits brought by others alleging personal injuries or property damage arising from an accident. Most claims are settled between injured parties and insurance adjusters without litigation. Injured parties must understand the consequences of an out-of-court settlement, including how the settlement affects their rights to proceed against the other driver.
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Liability Coverage
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Allstate Insurance explains how car insurance liability coverage includes three parts: bodily injury per claimant, bodily injury per accident and property damage. This results in three different limits listed under a customer's liability coverage, such as $50,000/$100,000/$50,000.
If an insured driver with those limits negligently injured six passengers in a van, her insurance company would pay no more than $50,000 to any one injured person and no more than $100,000 total to settle all the injury claims. The insurer would pay up to $50,000 to pay for the damage to the van.
Release of Claims
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Typically an injured party will not be able to sue a driver after settling with the driver's insurer. The New Hampshire Insurance Department advises those injured in car accidents that they will typically have to sign a release before receiving any settlement money from the negligent driver's insurance company. The release will prevent the injured person from seeking further payment from the other driver or her insurance company.
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Other Typical Settlement Conditions
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Releases typically include other conditions that affect the rights of an injured person. A release may include indemnity language, defined by The Free Dictionary as the obligation to pay for any loss or damage that may be incurred by another.
This would mean that an injured party signing a release with indemnity language would have to defend the released driver from any lawsuits later brought by other drivers stemming from the accident. The injured party would also have to reimburse the release driver for any resulting settlement.
Bad Faith Against Insurance Company
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An insurance company will not settle a claim on behalf of its insured without requiring a release because doing so could result in a bad faith claim from its insured, claiming that the insurer did not protect its customer. The Free Dictionary generally defines bad faith in the legal context as an intentional dishonest act committed by not meeting legal or contractual obligations.
An insurer can not protect its insured once a case goes to trial. If a plaintiff obtains a $50,000 verdict against a defendant holding only $25,000 in liability coverage, the insurer will have to immediately pay its policy limits and the plaintiff can pursue the remaining $25,000 from the defendant.
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References
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