Vehicle crash victims often believe that if they have the same insurance as the responsible driver, claims can be settled quickly. Unfortunately, this is usually not the case. Here’s why.
Assume that Driver 1 hits Driver 2, and that Driver 1 and Driver 2 both have the same insurance company. Driver 2 believes that Driver 1 is responsible, and makes a claim on Driver 1’s insurance company.
When this claim is made, the insurance company will owe separate duties to both Driver 1 and Driver 2. More specifically, the claim will be made by Driver 2 (probably through Driver 2’s lawyer against Driver 1). The insurance company for Driver 1 will then have a duty to defend driver 1, not taking into account that they also have an insurance policy for Driver 2.
Thus even though the same insurance company represents both drivers, they cannot simply pay driver 2’s claims simply to “work things out.” Instead, as part of their duty to defend Driver 1, they must treat the claim as if Driver 2 was not also insured by their company. They must, for instance, evaluate the merits of the claim, and determine whether a settlement should be paid, and if so, how much.
In addition to defending Driver 1 in this case, the insurance company will also be concerned about their own best interests – namely minimizing any payout, as any payout will come from their own pockets.
If the insurance company has paid any medical bills or property damage costs (like for a wrecked vehicle) to or on behalf of Driver 2, the insurance company will also have a lien on any settlement payments for such amounts. This means that if a settlement is made, the insurance company will be owed a portion of the money that it pays for the damages caused by Driver 1 equal to such lien amount. In effect, the lien amount will go right back into the insurance company’s pocket from the money that it pays as part of the settlement). The same result will also happen if the case is taken to court and a jury verdict is awarded with respect to the value of the lien.
While the specific duties of the insurance company are somewhat complex if the driver causing an accident and the driver injured have the same insurance company, if you have been injured, the easiest way to understand these duties are to assume that the driver who hit you does not have the same insurance company as you do.
It will not be helpful, for instance, to try to talk to your insurance company and tell them that because you have been a longtime client, they should side with you in determining that the other driver is liable. Instead, your insurance company will owe you only the benefits that you have under your insurance policy, such as to replace the value of your car if it is totaled and any medical or other benefits that may be encompassed in your policy.