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Understanding the Obligations of Arizona Insurance Companies in Vehicle Accidents

We’ve been told by television commercials repeatedly that insurance companies are our friends, and if we’re injured, they will be there to help us.  But when an accident happens, the promised help often isn’t there.  After an accident, there can be confusion about the obligations of insurance companies, particularly if the other driver at fault has the same insurance company as we have.

The following is a short summary of the obligations of Arizona insurance companies in the case of vehicle accidents.

The Obligations of the Arizona Insurance Company for the Other Driver

If the other driver is insured, his or her insurance company will usually “step in” and control the claim and any litigation on behalf of the other driver (who is the defendant if litigation is initiated).  The other driver’s insurance company usually will have potential liability up to the liability policy limits.

This insurance company has no obligation to you.  They do not have to be fair. Their sole obligation is to their policyholder, and, ultimately, to themselves. Because they are adverse to you and your interests, you should expect that they will take any available action to deny your efforts for compensation, and to minimize any payout.

What Happens When Both Drivers are Insured by the Same Company?

In some cases, both the victim and the driver causing an accident will have the same insurance company. Most people would assume that since their own insurance company also represents the person causing the accident, the insurance company will be easier to work with and more likely to pay their claim. This is not the case.

It’s important to understand that although you have the same insurance company as the driver causing the accident, when handling the claim of the other driver, the insurance company has no contractual duty to you.

When an insurance company represents both drivers, it will act internally to ensure that different people within its organization represent each of the drivers. The insurance adjuster handling the claim for the negligent driver will normally take the same actions and handle the claim just as though the victim were not also insured by the same company. The person in the insurance company handling the claim for the other driver will normally do whatever they can to protect the insurance company and the other driver against liability, just as they would do if you were insured by different insurance company.

Arizona Uninsured and Underinsured Motorist Coverage

With Arizona uninsured and underinsured motorist coverage, you will have a claim against your insurance company based upon your policy if the driver who caused the accident either is uninsured, or if the other driver did not have enough insurance coverage to compensate you for your damages.  In a claim against your own insurance company based upon your policy with them, the insurance company has legal obligations to treat your claim fairly and to deal with you in good faith.  If it fails to do so, your insurance company may be liable for damages based on bad faith, which is a separate claim. You should also know that your insurance company cannot raise your insurance premiums just because you make a claim for insurance benefits under your own policy because of an automobile crash that was not your fault.

Example of Insurance Company Duties

Assume that you are hit by another driver and you sustain damages of $200,000. The other driver is insured by State Farm and has only $50,000 of liability insurance coverage. You are insured by Safeco, and in addition to your liability coverage, you purchased underinsured motorist coverage of $300,000.

In your claim against the other driver, State Farm’s duty is to its driver. It defends the other driver and seeks to minimize its driver’s liability. However, you successfully prove your claim and obtain a judgment against the other driver for your damages of $200,000. State Farm (on behalf of the other driver), therefore pays its full liability policy limits of $50,000 to you.  If the other driver does not have the financial capability to pay the remaining $150,000, you are left uncompensated for most of your damages. In that situation, you have a claim against Safeco on your own underinsured motorist policy for the remaining $150,000 of your damages. Safeco is your own insurance company and must deal with you fairly and in good faith.