Over the past several weeks, I’ve had a number of inquiries that follow this general model:
I am not happy with my country [pick a service provider] Because he [describe an act of negligence]. I think he owes me money. How do I file a liability claim with his liability insurance company and collect it?
In one word: It was not.
What does liability insurance really mean?
What we are dealing with here is a fundamental misunderstanding of what liability insurance is. Simply put, the purpose of liability insurance is to pay the insured’s court costs and damages arising from a claim against the insured. Therefore, if there is no lawsuit, no claim can be made. Even in the case where the liability is most obvious – like the lady who told me about the auto service company who left her keys in her car, which were later stolen – it is not worth calling the insurance company directly. They will just send you packing.
How can an insurance company get away with this?
Simple: they don’t “get away” with anything. In the case of the stolen car I mentioned above, it is the parking company – not the insurance company – that left its keys where it was ignited, and is therefore liable for its loss. Seems fair, doesn’t it? The arrangement between the valet company and its insurance company is completely private, and it goes like this: the valet company pays the insurance company a few hundred dollars a year, and in return the insurance company undertakes to pay its customers’ court costs and damages in the event they get sued. end of story.
What should you do?
In the parking example, the solution is simple: The lady reported her loss as a theft to her auto insurance company. They will handle the claim according to their arrangement with to her…and then they will go after the server company themselves in an attempt to recoup their loss. Once the auto insurance company files a lawsuit against the valet company, they will turn to the liability insurance company to cover the resulting costs. basic.
Will a car theft claim affect her insurance premiums in the future? Possible and possible not. Perhaps because – no matter where the error occurred – it showed an increased likelihood of car theft. Probably not because, in order to keep a good client, their insurance company might give them a break because the theft was someone else’s fault, and because they would end up getting their loss back anyway from the server company’s liability insurance company. No harm, no harm.
What about a case in which the aggrieved party does not have the luxury of having an insurance company ready to file a claim on its behalf?
In another email, I heard from a man who suffered a loss in a real estate transaction due to the negligence of his realtor. Of course he is not happy. The real estate broker is obviously responsible, so the gentleman wants to file a claim with the broker’s liability insurance.
Again, the purpose of liability insurance is to pay some or all of the insured’s court costs and damages after they were sued. Message me alone here. If he wants to recover his loss, he should hire a lawyer — not a requirement, actually, but still a good idea — and take the realtor to court. If he sues for the amount of his loss, plus court costs –And the If he can get the approval of a judge (or jury) – his realtor will be found to be legally liable for the amount of the judgment.
How he pays for it is his business. He will probably file a claim with his liability insurance company. Maybe he’ll mortgage his house and get a second job. Currency.
Is it unfair for the victim to incur the additional expenses – and the risk! The tormentor of taking his tormentor to court before he can collect his compensation and go on with his life? Nah. After all, if there is too much inconvenience, the plaintiff always has the option of asking for more money…and letting the judge or jury decide whether the request is reasonable.
Consider the alternative: letting the liability insurance company decide whether or not to pay a claim made by the injured party. It doesn’t take a genius to figure out how to do it who – which will turn.
You can shop for professional liability insurance quotes online for free at EINSURANCE.com.