Is there a reason not to use liability insurance?

Question

I was recently hit by a car while riding my bike home from work, and the police determined that the driver was at fault and wrote her a ticket. She is insured, and presumably has enough liability coverage to take care of my damages (mainly bike repair/damaged clothing, etc. and no serious injuries).

However, she has insisted that she will just write me a check for the damages and doesn't want to go through insurance. Her exact quote from our email exchange was "I am not reporting to insurance. Long story."

I'm conflicted about this because on the one hand, I'm getting reimbursed either way, but on the other, she seems to just want this problem to go away and may be affecting generosity to avoid higher premiums.

Is there a legal, or at least ethical, obligation to report this to her insurance company?

Answer 1

She damaged you - your beef is with her.

If she has insurance, the choice of is she wants to claim or not is up to her. She is not obliged to make a claim and probably not obliged to tell her insurer about it. Perhaps she has a $20,000 excess. Perhaps she is a person not covered by the policy (too young or otherwise excluded) Perhaps she is (legitimately) concerned that making claims will increase her premium.

Now, her contract may have a clause requiring her to disclose all accidents either ongoing or on renewal. However, the doctrine of privity of contract means that whether she does or not is no one’s business but hers and her insurer.

Answer 2

There is no legal requirement for either party to report a loss to their insurance company: the only legal obligation is to report an injury or property damage above a certain dollar amount to the police. Especially when a person is demonstrably at fault, making a liability claim against an insurance policy is likely to have negative repercussions (either raising of rates or even cancelling of policy). Since ultimately her obligation is to you, her insurance company only indemnifies her against her loss – if she wants to be indemnified.

Answer 3

Yes, two possible reasons off the top of my head.

She is possibly afraid that having the insurance company cover it, would be uneconomical. This could easily be the case if she has a high deductible, the amount she is going to pay you could easily be in less than her deductible, in which case reporting it does nothing but increase her risk of having her rates increased. Even if it is greater than the deductible, it may not be greater than the deductible and the feared change in her premiums.

Alternatively, her insurance may not be her insurance but something someone else pays for, and she may not, for whatever reason, want them to know about the accident and considers the payment worthwhile in order to keep the accident from them.

Note that regardless of the reason, you are not doing anything illegal or immoral, someone damaged you and they are quite properly making good on that. Her dealings with other parties does not involve you and are not your concern as long as you are adequately compensated for your damages.

Answer 4

I'd wonder about the situation where a person (a) has no money, (b) hates you, (c) is insured, (d) causes huge genuinely accidental damage, and refuses to contact their insurance to prevent your damage from being paid.

On the other hand, in most countries the purpose of 3rd party liability insurance is that victims get paid, so I would assume that the person's insurance will have to pay you anyway.