Who Pays When a Defendant Has Too Little Insurance?
One of things that most people don’t think about until they are injured is how much insurance coverage might be available to compensate them for someone else’s negligence. Too often, we as lawyers have to break the news to a client that a negligent driver, homeowner, bar or doctor doesn’t have nearly enough insurance to cover liability for a serious injury.
This deficiency was highlighted in one installment of the recent Boston Globe series on taxicabs, which discovered what most lawyers have known for years: the majority of taxicabs–which spend most of their time driving around on our roads–have less insurance coverage than those of us who use our cars with normal frequency. The sad result is that passengers or others who are severely injured or even killed by the negligence of a cab driver may find that there is only the Massachusetts state-minimum $20,000 of insurance coverage available to compensate for their losses.
As the Globe article noted, the large taxi companies have successfully arranged their business affairs to minimize their liability exposure. Using separate corporations to own cab medallions provides a lot of protection to owners, while leaving passengers with limited avenues of recovery for a serious injury. The protection offered by these separate corporations may be defeated in some cases–lawyers call this “piercing the corporate veil”–but it is a long and arduous process.
The lack of adequate insurance coverage is not limited to taxi cabs. Some drivers carry only the minimum amount of coverage, while some home owners have little or no coverage for injuries occurring on their property. Rhode Island requires $25,000 for drivers, while New Hampshire does not require drivers to have insurance unless they have a record of driving infractions. Most people with limited coverage also have limited assets from which to pay a large judgment against them.
The problem of inadequate coverage also extends to some professions. While doctors in Massachusetts and Rhode Island are required to have malpractice coverage, the minimum requirement is $100,000, and the most common policy limit is $1,000,000–which might sound like a lot until you consider that many malpractice claims involve serious permanent brain damage or other serious injuries, or even death. Massachusetts chiropractors are somewhat better–being required to carry at least $500,000 per claim, while lawyers are not required to carry malpractice coverage at all–although a client can determine whether his lawyer carries insurance by checking the Board of Bar Overseers website.
There are limited ways in which we can protect ourselves against the problem of inadequately insured defendants. Individual health insurance, disability policies, and life insurance can help to fill the gap in some cases, but these policies can be expensive and will not compensate for all losses. Too often, the end result is that we all share the cost of underinsured defendants through public benefit programs such as Medicare and Medicaid.