Legal Limits for damage reparation

Question

In the 2004 German movie The Edukators, part of the characters motivation revolves around a damage reparation:

"Jule is a waitress struggling to pay off a €100,000 debt she incurred a year ago when she crashed into a Mercedes-Benz S-Class belonging to a wealthy businessman named Hardenberg"

Around the world, specifically Germany, US and Brazil, I'm wondering how realistic this would be. In particular if the responsible party had car insurance with reasonable (but not infinite) coverage for third party.

In practical terms, let's say I have car insurance, which covers around 50k local monetary units in damages to third parties. Then I hit a very expensive luxury car, say a Ferrari, which for the purpose for this example is worth ten million local monetary units. Totaling 8 million in repairs costs. I readily call my insurance to reimburse the Ferrari owner. If taken to court, how much could I actually be charged in each of those countries?

My assumption is that I've made my precaution for paying any third party a reasonable amount (50k should pay the repairs for any regular car). After a certain amount, the owner of the Ferrari should be aware that he cannot reasonably expect that a regular person would or should have the means to repair his damages, hence after some amount it should be his problem.

In that case, for each of these countries, would I have to spend the rest of my life with debt? Would the insurance let me walk free of any further headache? Or would there be a reference amount I should pay on top of the insurance coverage?

Edit: For clarification, only property damage is assumed, no injured people.

Answer 1

You, personally, are responsible for all of the damage. If you have insurance, then your insurance company will indemnify you up to the limit of the policy and you will remain liable for the rest. For your example, the insurance would pay 50,000 and you would owe 7,950,000.

Third party property damage insurance is not compulsory in all (any?) jurisdictions while third party personal injury insurance usually is - that means you are covered for damage to people but not necessarily to things. Any third party property damage policy would not have a limit as absurdly low as €50,000; €10,000,000 would be more realistic. It is far more likely the protagonist was uninsured rather than underinsured.

If you have debts that you cannot pay as and when they fall due you are insolvent and you either need to come to a deal with your creditors to reduce and/or delay payment (either directly or as ordered by a court) or go bankrupt. Bankruptcy is painful but in some circumstances it may be less painful then carrying a debt you can’t pay.

Answer 2

My assumption is that I've made my precaution for paying any third party a reasonable amount (50k should pay the repairs for any regular car). After a certain amount, the owner of the Ferrari should be aware that he cannot reasonably expect that a regular person would or should have the means to repair his damages, hence after some amount it should be his problem.

I am not aware of any country in the world that has such a law.

Even when liability isn't formally limited, however, the owner of the expensive and damaged property does know that you can't get blood out of a turnip. Even a lifetime of garnishment and other kinds of debt collection won't begin to pay off more than a small percentage of many legally valid debts, so the utility to the car owner of trying to collect so much for the debtor's lifetime relative to the costs of collection, is dubious. What happened in the movie would be foolish action on the part of the creditor, even if it would usually be legal.

A debt like this could easily arise in the U.S. (and routinely does arise).

In most circumstances, this could be eliminated in bankruptcy in the U.S. in the absence of a bankruptcy discharge. But, some kinds of accidents, such as those caused by intentional torts (e.g. she smashed the expensive car on purpose for an understandable but not legally justifiable reason, not unlike those in this song or this other song), cannot be discharged in bankruptcy if the creditor makes a timely objection in the bankruptcy process (something I have successfully done for creditors in a few cases). See 11 U.S.C. § 523(a)(6). See also 11 U.S.C. § 523(a)(9) (claims for personal injuries due to drunk driving cannot be discharged in bankruptcy if a timely objection is made to the discharge in bankruptcy court).

Many other countries do not have such absolute prohibitions on the discharge of these kinds of debts in bankruptcy, although I don't know the law of Brazil or Germany on these points in particular.

There are limitations on what creditors can do to collect legally valid money judgments in the U.S. This is because some assets are exempt from creditor's claims (this varies greatly from state to state in the U.S.) as is wage and salary income up to 30 hours a week at the minimum wage plus 75% of remaining wage and salary income (this is a national rule). Many kinds of disability payments are also exempt from creditor's claims in almost all U.S. states.

There is also long, but not infinite, statute of limitations to collect a money judgment from a court, in all U.S. states except Delaware (which has not such limit). This statute of limitations ranges from 3 years to 20 years, in the 49 U.S. states that have such a statute. It is actually worse than it appears in the chart, because many states allow a creditor to extend the duration of an unpaid money judgment by taking additional court action.

But, the woman's non-exempt wages could be garnished for a couple of decades, in many states, and her non-exempt assets could be seized by creditors at any time that she has them until the statute of limitations on the collection of the judgment expires.

There are hundreds of thousands, if not millions, of people in basically her situation in the U.S. at any given time. In 2016, which was not a particular high or low year for numbers of bankruptcies, there were about 770,000 personal bankruptcies in the U.S., and debts that can't be discharged in bankruptcy survive a bankruptcy filing in a small percentage of these bankruptcies each year. There are also many people who have debts that can't be discharged in bankruptcy, that don't bother to file for bankruptcy as a result.

Answer 3

The laws depend on the jurisdiction, but one defense that is generally available is "contributory negligence". A person sued for totaling an 8 million euro car could assert that driving that expensive of a car on public roads is an act likely to result in large damages, and thus an act of negligence. Whether this is in fact negligence is a question of fact, so it would be up to the jury to decide whether to accept it. The jury could find that it is unreasonable to impose on everyone the risk of incurring a debt of 8 million every time they go onto the road, and limit the damage award to what one could reasonably expect from a car accident. If the jury finds the defendant unsympathetic, however, they can reject this argument.