Collision Coverage and Recovering Out-of-Pocket Expenses


There are many types of auto insurance that one can purchase. The most common types cover property damage, bodily injury, and death. Liability auto insurance covers a driver when he or she has caused an accident. In such an instance, the liability insurance carrier may be held responsible for paying the victim from their insured’s liability policy. For liability insurance, Virginia law requires that drivers purchase insurance in the amount of $20,000 coverage for property damage, a minimum of $25,000 coverage for the injury or death of one person, and $50,000 coverage for the injury or death of two or more people. One of the types of supplemental auto insurance drivers can buy is known as collision coverage. This type of policy covers the cost of repairing or replacing a vehicle if it is damaged or totaled in an accident or “collision.” Depending on the specific policy, it may cover (included but not limited to) damage due to:

● Collisions with another vehicle while moving
● Crashing into a stationary object like a guardrail
● A rollover accident that does not involve another vehicle or object
● Having a car hit by another vehicle while it is parked.

Collision coverage does not deal with personal injury claims. If a driver is physically injured in an accident and the other driver caused the injuries, the victim will need to file a third-party claim or lawsuit with the driver’s insurer, through another type of auto insurance.

How Does Collision Coverage Work?

When someone files a claim against his or her collision coverage, that person will most likely have to pay a deductible. This amount depends on the specific policy but can range from $100 to $1,000 or more. Your insurer will pay the amount it costs to repair the vehicle in excess of the deductible, but only up to the policy limits. If the repairs cost more than the value of the car at the time of the accident, then the car will need to be replaced. In this case, the insurer will usually pay out the market value of the car lost immediately before the accident, minus the cost of the deductible, and, of course, only up to the policy limits.

Damage Caused by Another Driver Leads to Subrogation

If a driver’s vehicle is damaged or totaled in an accident that is the driver’s fault, then he or she will simply work with his or her insurer to repair or replace the vehicle. Following the accident and claim, his or her insurance premiums may increase. However, if another driver was responsible for the accident, then the insurer will want to be reimbursed for the money it paid in repairing or replacing the car. Through a process known as subrogation, the insurer will demand informally, or file a lawsuit against the other driver and/or their insurance company for the amount in court, or file a claim in an intercompany arbitration forum, where appropriate.

The insurer will let the victim know if it is going to subrogate a claim against the other driver to get its money back that it paid for the damaged car. If the victim paid a deductible, this will also be a part of the claim as well. The insurance company may, as a courtesy, assist in recovering the insured’s out-of-pocket expenses, in addition to the deductible, by forwarding any out-of-pocket expenses to the negligent party’s insurance company for their review and consideration of payment. However, the victim’s insurance company, as subrogee, is not legally required to do so, since, in general, the nature of the insured’s relationship with the insurer only extends to the insurable interest and not directly to the insured, as an individual. You, as the insured, will want to ask your insurance company or their subrogation counsel about your additional expenses (e.g. rental expenses above the rental expense policy limit, etc.).

If the liability insurance carrier does not pay and the subrogation carrier is forced to take legal action, they may inform you that you need to take care of your out-of-pocket expenses on your own. Depending on the uninsured amount, this may not be economically feasible, when you consider the costs and time spent to prosecute the claim for those expenses. If you also have a personal injury claim, for which you will retain an attorney, a personal injury attorney may be willing to add these expenses (not covered by collision coverage insurance) in a demand for your personal injury claim against the at-fault driver. If not, then one could consider waiting and seeing if the subrogation action is successful and negotiating with the other driver’s insurance carrier for the out-of-pocket expenses, based on a good result at court.

Pertaining to the subrogation, if the insurance company receives the amount demanded, the driver who is not at fault will be reimbursed his or her deductible and any out-of-pocket expenses received. In most cases, if the insurance company receives only a percentage of the money demanded (e.g. 70% of total demand), then it will give the insured a pro rata share of the deductible paid (e.g. 70% of the deductible paid).

One usually does not need to be overly involved with a subrogation claim. One, however, must support the insurer in making this claim and cannot do anything that would limit the insurer’s right to recover funds, such as sign a release with the other driver waiving the right to subrogation.

The Right to Recover for Personal Injuries

In most car accident situations, a person will demand compensation from the other driver’s insurance to pay for any personal injuries incurred. However, if the victim is unable to reach an agreeable settlement for some other reason, then he or she may need to file a lawsuit. As part of a personal injury claim, an injured party can seek compensation for medical expenses, lost wages, and pain and suffering.

This claim is separate from the claim for subrogated property damage claim. As you recall from earlier, if the collision insurance covered the property damage expenses from the accident, then the insurer may subrogate the claim regarding the property damage. Since the collision insurance does not cover personal injuries, an injured party maintains their right to go to court over their injuries. However, he or she cannot sue for the property damage expenses that have been subrogated by the insurance company.

If the insurance company subrogates, as mentioned, the insurance carrier may retain a subrogation attorney to pursue their right to recovery. Although the personal injury and subrogation actions are two separate claims, it is not uncommon for an attorney for the subrogated property damage claim and a retained personal injury attorney representing you for your personal injury claim to communicate about their respective intentions. If you are injured and intend to pursue compensation for your injuries by retaining an attorney, it is important to let the subrogation attorney know that you are in the process of retaining a personal injury attorney. The personal injury attorney will want to communicate with the subrogation attorney, especially if the subrogation insurance carrier plans to file a civil court action for the property damage, as a part of your car accident. The reason is that the first one to court is likely to set the table for others to follow. This is a legal principle called res judicata. If the subrogated insurance company goes to court, not arbitration, and wins, then it arguably bodes well for the personal injury suit, but if the subrogation attorney loses on the merits, then the Court may enforce that same result against the victim in a personal injury action, arising from the same accident.

It is possible that the personal injury attorney will want to tell the subrogation attorney to delay any court proceeding to give the injured party the best opportunity to recover their compensation, especially if the injuries are significant. This is also likely to be the case, in Virginia, where the statute of limitations for personal injury claims is a two-year period, exceptions apply, and the statute of limitations for a destruction of property claim is a five-year period, meaning the subrogation attorney has more time to resolve their claim.

If the personal injury attorney settles the claim before the property damage claim is settled, the personal injury attorney should only release the defendant and/or his insurance carrier from the personal injury claim asserted on behalf of the client, so that the subrogation attorney may continue his or her effort to recover the property damage, including your deductible.




Disclaimer: The information in this article has been provided for general information purposes only. Every case has its own set of particular facts and the law must be analyzed, according to those facts, to reach any reasonable conclusions. The information provided is not intended to and does not constitute legal advice, and does not create an attorney-client relationship between you and The Law Office of Christopher G. Findlater. No attorney-client relationship is formed unless specifically agreed to in writing. For legal advice, please consult with an attorney pertaining to your case and particular circumstances.