Knowledgeable Answers To Your Questions About Accident Insurance

If you have been involved in an accident in Pennsylvania, it is important to know what to do. At the Erie law firm of Quinn, Buseck, Leemhuis, Toohey & Kroto, Inc., we get a lot of questions from potential and existing clients. Following are answers to a number of commonly asked questions.

For more information and for an assessment of your personal injury claim, call us at 814-833-2222 in Erie or toll free at 866-641-8996. You may also send us an email.

I might have accidentally injured someone, or caused property damage, but I haven't been sued yet. Is there anything that I need to do?

Answer: Many people are reluctant to contact their insurance company when something bad happens; they are worried this will increase their rates or have other negative consequences. However, an insurance company will not increase your rates or otherwise change your insurance coverage simply because they are made aware of a possible claim. Your insurance company cannot increase your rates unless it has been determined that you are at fault and it is obligated to pay a claim.

Therefore, the best thing you can do in this situation is to notify the insurance company immediately so that it can promptly investigate the incident and prepare to defend you if you are sued down the road.

Do not try to negotiate a settlement on your own or offer to pay as the insurance company may deny coverage on this basis. Just tell the person that you will report it to your insurance company.

I have several types of insurance. Which company do I call?

Answer: It all depends on the type of incident:

  • Were you driving your own vehicle? Report it to your own automobile (or motorcycle) insurance company.
  • Were you driving someone else's vehicle with their permission? Report it to their automobile (or motorcycle) insurance company and your own (if you have any). Both may have coverage for you.
  • Did the incident happen on your property? Call your homeowner's (or tenant's) insurance company. Many of these policies have liability coverage that protects you (with some exceptions) for incidents caused by conditions on your property.
  • Did you or a family member cause an incident away from home (not with a motor vehicle)? With some exceptions, your homeowner's (or tenant's) policy protects you (and the family members who live with you) from liability for any negligent act that causes injury or property damage to another, even if it occurs away from your home.
  • Did the incident occur while you were operating a boat? Contact the insurance company that insures the boat.
  • Did the incident occur while you are doing your job? Report it to your employer who should have insurance coverage in place to protect you.

To notify the insurance company, you should call them and send them a written confirmation (such as an email or a letter) to ensure there is a record of the communication and of the possible claim. This will protect you in case the insurance company claims they did not receive timely notice.

What happens after I notify the insurance company?

Answer: After the insurance company receives notification of the incident, an "adjuster" will be assigned. They will let you know that the insurance company has received your information. They might instruct you to do certain things or request information from you. They will likely request a recorded statement.

Every insurance policy requires that you cooperate with the insurance company. Doing so ensures your best chance of success with a potential claim. Your insurance adjuster will ask you to provide a description of the incident, the names and other information about the other individuals involved and anything you may know about the injuries or property damage. You should try your best to provide as much detailed information as possible.

After this, the adjuster will begin to investigate the incident to see:

  • If the policy provides coverage for it
  • Who was at fault
  • What was the extent of the physical injuries or property damage

Keep an eye out for communications regarding this investigation. You may receive one of the following types of notices from the company about coverage for the incident:

  • An acceptance of coverage letter
  • A denial of coverage letter
  • A notice that the company needs to do further investigation to gather more information
  • A "Reservation of Rights" by the insurance company

I notified the insurance company of a possible claim, but they denied coverage. What do I do now?

Answer: There are several reasons this might happen, and what you do next depends upon your particular circumstances. The most likely reasons are that you are not covered by the policy, or the incident was the result of something that is excluded from coverage under the policy. If you receive a denial letter, you should contact an attorney immediately to make sure your rights are protected. The Quinn Law Firm has experienced attorneys who would be happy to talk to you about this.

I notified the insurance company of a possible claim, and they accepted coverage. What happens now?

Answer: The insurance company will evaluate the results of its investigation into the incident and determine whether they should try to settle the claim or deny the claim with the opposing party. The insurance company has a "fiduciary duty" to protect you. This means that the insurance company must not put its own interests ahead of yours in its decision-making and may not expose you to any unreasonable risk. If the risk is too great, it must make a reasonable effort to settle the claim up to the limit of liability coverage that was purchased with the policy.

Keep in contact with your insurance adjuster regarding this potential claim and notify them of anything that happens (i.e. if you receive a "Notice of Suit," "Writ of Summons" or a "Complaint," if a demand letter is sent to you by the injured party, etc.). It is important that the insurance company is kept up to date with these matters as they may also be responsible for your defense against a potential lawsuit.

I received documents indicating that I've been sued. What happens now?

Answer: Regardless of whether or not you have already notified the insurance company of this incident, make sure you send a copy of the legal papers (a "Notice of Suit," a "Writ of Summons," or a "Complaint") to the insurance company immediately. They will review the Complaint and make sure you have coverage in the policy for any of the claims against you. The insurance company has two obligations to you once you are sued:

  • An obligation to pay for ("indemnify") all judgments against you for any claims identified in the suit papers (the "Complaint") which are covered by the policy, up to the limit of the liability coverage purchased.
  • An obligation to defend you (hire an attorney to represent you and cover the costs of your litigation). This obligation is broader than its obligation to indemnify you: if the "Complaint" identifies at least one claim against you that may be covered under the policy, the insurance company must defend you for all of the claims, even the ones that are not covered by the policy. That obligation to defend you remains in effect until there are no claims left against you that could be covered under the policy.

The insurance company will then send you a letter informing you of one of the following things:

  • That they are denying coverage and defense of the lawsuit because none of the claims are covered under the policy
  • That they will defend you and cover all of the claims in the lawsuit
  • That they will defend you under a "Reservation of Rights" because some (but not all) of the claims are covered under the policy

If the insurance company has agreed to defend you, it will retain absolute control over your defense of the claim and will provide you with an insurance defense attorney who will personally defend you in the claim.

Can the insurance company settle (or refuse to settle) the claim against my wishes?

Answer: When the insurance company accepts coverage for some or all of the claims against you, it retains absolute control over your defense of that claim. Because the insurance company retains absolute control over your defense, the insurance company also has the right to decide whether or not to settle your case or fight it in court. If no settlement is reached between the parties, then the suit will proceed forward to court. Because of its "fiduciary duty" to you, it cannot expose you to an unreasonable risk of a judgment against you by refusing to make a reasonable settlement up to the limits of the liability coverage in the policy.

What is a "Reservation of Rights letter" and what does it mean?

Answer: If it is clear in the Complaint that none of the claims could possibly be covered under the insurance policy, the insurance company does not have any obligation to indemnify or defend you, and they will just send you a denial letter (Link to denial section).

If there is at least one claim that is potentially covered (even if other claims are not), Pennsylvania law gives the insurance company the option of reserving its right to deny coverage to "indemnify" you for any claims that may not be covered, while still maintaining absolute control over your defense against all of the claims (covered or not). (link to "what to expect of RoR" section)

To reserve this right, the insurance company must timely notify you of its intention to do so by sending you a Reservation of Rights ("RoR") letter as soon as it reviews the Complaint and determines that there are claims against you that may not be covered (are excluded). In this RoR letter, the insurance company must notify you that the insurance company may deny coverage to "indemnify" you (pay for a claim) if you are found liable for claims that are not covered by the policy. It must tell you exactly why, under the policy, it believes that it does not have to indemnify you, and what claims it may deny. This notice must also inform you of your right to retain private counsel, at your own expense, to assist with your defense of those claims that are potentially not covered.

A recent ruling from the Superior Court of Pennsylvania obtained by attorney John McCandless and attorney Arthur Martinucci solidified this obligation on the part of the insurance company to provide a timely RoR letter to its insured. In Erie Insurance Exchange v. Lobenthal, the court found that Erie did not provide sufficient or timely notice to its insured of its intention to reserve the right to deny coverage.

As background, Erie sent two RoR letters to the insured's parents. Neither letter mentioned the insured who was being sued for the incident; on the contrary, each stated only that Erie Insurance was reserving its rights for claims against the insured's parents. The insured (who was 18) lived at home with her parents, but the Court found that this was not sufficient notice to her.

Despite the fact that Erie had been put on notice (when the Complaint was filed months earlier) that certain claims were excluded by the policy, Erie failed to say exactly which claims were excluded under the policy, and why, until it sent the second RoR letter (to the parents) three months after the defense lawyer hired by Erie had gotten the trial court to dismiss the only claim against the insured that was covered under the policy.

The Court found this notice to be untimely. Erie Insurance had been put on notice months earlier – when the Complaint was originally filed – that certain claims were going to be pursued. Erie Insurance had a duty then to determine that the claims were not covered and to notify its insured, yet it continued to control her defense. It ruled that Erie had a duty to send a RoR letter to her notifying her of the claims that were excluded before asking the Court to dismiss the claims that were covered. The Court held that the insured had been prejudiced by Erie's actions because she was unaware that she may not have insurance coverage or defense of the lawsuit against her, and was deprived of her right to hire a private attorney to defend and advise her. Generally, in any case where a RoR is not properly communicated to an insured, prejudice to the insured is assumed by the court.

What can I expect if the insurance company has reserved its right to certain claims?

Answer: While the insurance company is defending you against all possible claims, a Reservation of Rights allows them to simultaneously ask a court to determine whether the policy provides coverage for some or all of the claims in the Complaint. This is in a separate lawsuit called a "declaratory judgment action". If the court determines that the policy does not cover any of the claims in the Complaint, the insurance company is no longer obligated to indemnify or defend you.

You, through the assistance of your private counsel, can also file a declaratory judgment action.

What role does your insurance defense attorney play?

Answer: An insurance defense attorney is paid and provided by the insurance company for your benefit. This insurance defense attorney has the obligation to represent your interests against the individuals suing you. This is because your insurance defense attorney stands in an attorney-client relationship with you, and must put your interests ahead of the insurance company's interests. Importantly, however, the insurance company alone decides whether to settle the case against you.

Two problems may arise during your insurance defense attorney's representation of you:

  • First, while your insurance defense attorney's primary responsibility is to you, they may have a long-standing professional relationship with, or even be an employee of the insurance company. Generally, when your interests are the same as those of the insurance company, there will be no issues. However, where your interests differ from those of the insurance company, the attorney may encounter a conflict of interest. This may arise due to differing views held by you and the insurance company on how to handle your defense, or when there is a Reservation of Rights. If such a conflict occurs, it may be in your best interest to retain private counsel so that you retain ultimate control over your defense. This may, however, cause the insurance company to deny coverage ("indemnity") for the claims against you.
  • Second, sometimes the insurance company unreasonably refuses to settle a case, and exposes you to a judgment that is greater than the limits of liability, which were purchased with the insurance policy. This can cause you to become personally responsible for paying the remaining ("excess") amount of the judgment to the injured party. The insurance defense attorney has an obligation to try to convince the insurance company to settle but has no control over the company's decision. Under these circumstances, it may be in your interests to hire a private attorney to remind the insurance company of its "fiduciary duty" (link to fiduciary duty section) and attempt to force it into settling. If it refuses, the insurance company may be liable to you under a claim of insurance "bad faith". If you are successful in proving that the insurance company committed "bad faith," a court may require the insurance company to pay the excess amount of the judgment.

If you find yourself in either of these positions, or believe that your insurance company or insurance defense counsel is not adequately protecting your interests, please contact us. An experienced attorney at our office would be happy to discuss your options with you.