Uninsured Drivers: What’s Your Liability if You Have a Car Accident without Auto Insurance?

It is difficult to envision an insurance company going along with a scheme where they always pay for the all the damages, even if their insured is not at fault for the accident. How can they possibly assess their risk that way?  The bottom line would be a bottomless pit!  Of course, this is not the way it works, and that is why everyone needs to have his or her own insurance, whether it is required by law or not.

When you have an auto accident, if you are at fault, you, or your insurance company, will have to pay for both your damages, and the damages to the car or cars you hit and any injuries to the people inside them.  If you have no insurance, you are still responsible for having caused the accident, and will still be called upon and legally liable to pay out of your own pocket for the other guy’s damages. 

If you are at fault and have no insurance, but the other driver has insurance, that has no effect on your obligation to pay for his damages.  Yes, he can go through his own insurance to have his car repaired, but they will come after you to pay them back.  That’s called subrogation.  Subrogation is a legal demand for reimbursement.  Whether the other driver is insured or not, if it was your fault, paying to make the other driver whole, both his body and his property, is your responsibility and your legal duty.

If you are not at fault for the accident, the other driver is responsible for his own damages as well as yours.  If he has insurance, you’re set.  If he doesn’t, you will wish he did if your damages and/or injuries are significant.  The bottom line is, everyone should have insurance!

Note that the consequences of being uninsured vary by state. Some states now limit the damages that an uninsured driver can recover following a car accident, even when they are not at fault, for example by barring them from making a claim for non-economic damages (typically "pain and suffering'). They may also face increased potential liability in some no-fault states. For example, in Michigan, an at-fault uninsured driver may be liable for all damages to another driver's vehicle, while insured drivers have their liability capped at $500. Also, in most states, it is a criminal offense to drive without having your car properly insured.

Where an uninsured driver causes injuries to another person, the driver will not be able to call upon the auto insurance carrier to defend against any resulting lawsuits, or to pay any settlement or award of damages resulting from litigation. They may have to pay a judgment out of their personal assets. If you have no money, you may need to sell your house, or have your wages garnished to satisfy a legal judgment against you.  This is serious business.  In some states, a driver with an unsatisfied judgment resulting from a car accident will not be able to renew his driver's license until the judgment has been paid. Uninsured drivers may well be forced into bankruptcy.

I urge you to purchase auto insurance, even if you can only afford the minimum amount of liability coverage required in your state.  I hope you never have to use it, but if you do, you’ll be very glad you made the investment in your own financial protection.