09/19/2019
California Insurance Basics – What Does It All Mean?
This is a topic no one really wants to talk about but sticking your head in the sand isn’t going to work when the unthinkable happens. I know it’s a long post, but please read it fully, it might make a huge difference to you some day. In my line of work (full disclosure, I am an injury attorney and a motorcyclist) I come across far too many people who either don’t know what their insurance coverage really means, how the system works, or worse yet, choose not carry insurance. I figured this is a good time to go through some of the basics of the law, insurance coverage, and how it affects you as a motorcyclist.
Let’s start with the law; California requires all motorists to carry, at a minimum, liability insurance which meets the minimum coverage requirements for the state. What does that mean? Liability insurance exists to protect other motorists on the road from harm caused by you. There are two basic parts to insurance coverage; property damage coverage, and bodily injury coverage. The CA minimum for liability insurance is $15,000 per person and $30,000 per incident for bodily injury, and $5,000 for property damage. Basically, what this means is that if you’re carrying the state required minimum insurance, and you cause an accident, or are involved in an accident in which you bear some fault, resulting in property damage and bodily injury to another, your insurance company will pay the injured party or parties a maximum of $15,000 per person, not to exceed $30,000 per incident for bodily injury, and up to $5,000 to repair their damaged property. So, the law exists to protect others on the road from our “bad acts,” mistakes, negligence, etc. With me so far?
What happens if you don’t carry insurance? California Proposition 213 basically says that if you don’t meet the minimum insurance requirements of the law, you are barred from recovering for any non-economic damages. What does that mean? If you’re injured in an accident, and are not at fault, you are typically entitled to recover for your economic and non-economic damages. Economic damages include things such as hospital bills, damage to your vehicle, lost income, and pretty much any other out of pocket loss. Non-economic damages are designed to compensate injured parties for their “pain, suffering, inconvenience, physical impairment, disfigurement and other nonpecuniary damages” suffered as a result of the negligence of another. Often an injured person cannot be “fixed” or put back in their pre-accident condition, so the only way we can make the person whole is with money. This is why non-economic damages are important, and they can end up being a very large part of your recovery. So, in summary, no insurance, no non-economic damages.
Here’s where it gets really important to know what coverage you have and what it means. As we discussed above, CA only requires a minimal policy of 15k/30k/5k to comply with the law. Let’s discuss a hypothetical scenario: Someone blasts through a red light while texting and takes you out, sending you to the hospital with 100k in bills and a 6-month recovery process. They’re 21 years old, renting an apartment with a roommate, and make just enough to get by in our high cost of living state. They opted for the minimum insurance coverage since everything else in life is already so expensive. You had insurance (liability only), have zero fault in the collision and the police report documents the texting and driving, and witness statements confirm the other party ran the red light. You’re thinking, “I’m set” right? Hang on for a second. They complied with the law, their insurance company is only obligated to pay $15,000 for your bodily injury and $5,000 for your property damage. That’s it, done, finished. Then you ask, “But wait, can’t I sue them?” If they don’t have any assets, what exactly do you stand to gain by suing them? Probably nothing. And if they’re buying minimum insurance, it’s probably because they don’t have assets to protect in the first place.
You can see how this leaves you in a bad situation. The motorcyclist is almost always the one who will be seriously injured in a collision. We all know the risks of riding and have either seen or experienced firsthand the types of injuries that occur while riding a motorcycle on the street. So, what can you do?
Let’s talk about additional coverages. Some people say, “I have full coverage, I’m good.” Unfortunately, that may not mean much in the hypothetical scenario above. In addition to the minimum required insurance, you can get several additional coverages. Full coverage can mean different things, but what it typically means is that your insurance company will cover your property damage whether or not you’re at fault. In addition, full coverage limits are often higher than the minimums when it comes to property damage. So if your bike is worth $15,000, but the guy that hit you only has the minimum of $5,000, not only will your full coverage insurance cover the fair market value of your bike, they won’t make you wait to collect from the other party. Sounds great, right? It gets better, and this is my favorite part of insurance coverage. Insurance companies offer coverage called UM/UIM which stands for Uninsured Motorist/Under Insured Motorist coverage. Why is this important? Your insurance company will protect you when the other party has no coverage, or not enough coverage to compensate you for your damages. If you opt for the minimum UM/UIM coverage, you will at least be protected from uninsured drivers.
I always advise motorcyclists to buy as much UM/UIM coverage as they can afford. Here’s why; Let’s use our hypothetical from above, except now you have UM/UIM with 100k/300k limits. You get to collect the $15,000 from the party at fault, and your insurance company can pay you up to an additional $85,000 for a total of $100,000. Way better than only getting 15k, right? It’s still not enough given the severity of your injuries, but it’s better than being left with a few thousand dollars if you don’t have that coverage. The best part is that it’s not expensive to add UM/UIM, and the limits go all the way up to 500k or more in certain policies.
Here’s the bottom line. How much would you want if you were put in the hypothetical scenario above? We all know it’s realistic. We’ve been there or have seen our friends go through it. What’s 6 months of your life worth to you? How would you deal with 100k in hospital bills, lost time from work, lost time with loved ones, a reduction in quality of life due to pain? What’s the number in your mind? That’s how much UM/UIM you should buy. The hardest part of my job is telling the person in the scenario above that there’s nothing we can really do because the other person has no assets, and there’s no more insurance coverage. Mitigate your risks, protect yourself, don’t rely on the drivers on the road to protect you. The vast majority of insurance policies in effect in this state are minimal policies, meaning 15k/30k/5k. If you choose not to buy more insurance, at least educate yourself and understand what that means and what you’re potentially giving up when the unthinkable happens. And if you have questions, speak to an attorney before it’s too late.
This was in no way meant to be legal advice or a complete analysis of the laws or the insurance system of this state. This is for informational purposes only and does not create any type of attorney/client relationship, nor is it attorney advertising.
