Whose Name Is on the Lawsuit? How Claims Against a Minimum Policy Really Work

"That's what insurance is for, they'll go after the insurance company" is one of the most common things people say about minimum coverage. It is half true, and the half that is false is the half that matters at low limits.

Myth and fact

Myth: "If I'm in a crash, the other person's claim is against my insurer."
Fact: The claim is against the person responsible. The insurer's role is to defend that person and pay what is owed on their behalf, up to the limits bought.

When the insurer itself can be sued

Insurance Code 11580 requires every California liability policy to contain a provision that when a judgment is obtained against the insured in an action for bodily injury, death or property damage, the judgment creditor may then bring an action against the insurer on the policy and subject to its terms and limitations to recover on the judgment. Two things follow:

1. The order is fixed: a judgment against you comes first.
2. The action against the insurer is on the policy, so it is bounded by the policy's limits.

The same section requires a provision that the insured's insolvency or bankruptcy does not release the insurer from paying damages for injury or loss during the life of the policy. Your insurer cannot walk away from a covered claim because you have no money.

A worked example

The figures are illustrative. The structure is the law: the policy pays up to its limits, and the judgment itself is against the driver.

What about court costs and interest?

Vehicle Code 16056 describes the required minimum limits as exclusive of interest and costs. Whether your policy pays items such as court costs and post-judgment interest in addition to its limits is set by its own wording, often in a section on supplementary payments, and varies by insurance company. It is a fair, specific question to ask your carrier.

What this means for you in practice

• You may be served. If papers arrive with your name on them, forward them to your insurer the same day. Ignoring them does not move them to the insurer.
• Your insurer's defense matters. It is part of what liability coverage buys, and our page on the duty to defend explains where it generally stops.
• The balance above the limit is yours. How it is resolved is a legal question for an attorney, and it is worth getting that advice early rather than after a judgment.

The related myth

Myth: "The insurance company pays whatever the court awards."
Fact: It pays what the policy covers, up to the limits on your declarations page. At 30/60/15 those limits are the floor the state allows, as set in Vehicle Code 16430.

If the gap between those two sentences worries you, see what higher limits cost here; it is often less than people expect.