When you purchase an automobile insurance policy, you receive a policy book containing the terms and conditions of your contract with your insurance company. Some auto insurance policies contain provisions stating that the coverage under your policy is non-contributory. A non-contributory provision affects the way the insurance company pays for claims under your policy.
A non-contributory auto insurance policy is one in which the insurance company does not seek contributions from other insurance companies or primary parties for the payment of claims. In contrast, a contributory auto insurance policy may seek partial payment from other insurance companies or parties that may be held liable for damages caused by an automobile accident.
A non-contributory auto insurance policy typically applies to business auto coverage in which an employee, agent or contractor of the employer operates a vehicle owned or leased by the employer. This prevents the employee, agent or contractor's own auto insurance policy from having to pay for damage caused by an accident in the course of employment or business duties. It may also keep the driver from having to contribute out-of-pocket funds to pay for damages.
A non-contributory auto insurance policy may allow for faster payment of claims, because there is no need for arbitration or negotiation among insurance carriers or other liable parties to determine the percentage of damages to be paid by each. Arbitration and negotiation can be time consuming, and can delay the repair of the damaged vehicle or the payment of medical expenses. A non-contributory auto insurance policy may also reduce an employee, agent or contractor's personal financial liability for damages.
Although a non-contributory auto insurance policy may prevent the insurance company from seeking contributory payments from other insurance companies or liable parties, it does not require the insurance company to provide payment in excess of the policy limits. If you cause injuries or property damage in excess of the policy limits, you or another insurance company may be responsible for excess payments. For example, if a non-contributory policy has a liability limit or $300,000, and you cause an accident that results in injuries and property damage totaling $400,000, the insurance company providing the non-contributory policy is not responsible for $100,000 of the damages.