All states have financial responsibility laws that require motorists to show evidence of ability to pay for damages arising out of an automobile collision. In Indiana, the evidence of ability to pay is shown through automobile liability insurance which may not be less than $25,000.00. A person who does not show evidence of such insurance at the time of a collision is subject to a ticket, suspension of his or her license and payment of a reinstatement fee.

The Indiana Department of Insurance reports that in 2002, 3 out of 20 of Indiana’s largest private companies were insurance companies.1 According to a 2004 study conducted by the Center for Rural Development at Purdue University, the insurance industry employed 60,240 people whose average wages were more than $10,000.00 above the state’s average wage for all industries. Id.

Despite the legal requirement that all motorists be insured and the pervasive presence of insurance companies in our state, Indiana, unlike other states, does not allow an injured party to sue the insurance company of the person who injured them in most cases.

This results in insurance being hidden from the jury. For example, when a person is injured by a wrongdoer, under Indiana law, that person is entitled to pursue the recovery of certain damages from that wrongdoer. Because Indiana is not a direct action state allowing the person to sue the wrongdoer’s insurance company directly, the person will name the wrongdoer in a lawsuit. If the wrongdoer is insured (as in 99% of the cases) the wrongdoer’s insurance company will hire a lawyer to “defend” the wrongdoer in the lawsuit. The lawyer is actually paid by the insurance company, not the wrongdoer, but this fact is kept secret from the jury because Indiana is not a direct action state and juries are not allowed to hear about insurance coverage during trials.

For more information on insurance companies, go to to read Stephanie Mencimer’s article, “False Alarm: How the media helps the insurance industry and the GOP promote the myth of America’s ‘lawsuit crisis’.

Definitions of different components to an insurance policy:

• Comprehensive coverage: pays for damages to your vehicle caused by anything other than a collision, including vandalism, theft and natural disasters. NOLO Encyclopedia of Everyday Law 2006.

• Liability coverage: provides compensation to third parties who are injured or whose property is damaged due to the fault of the insurance holder. Liability policies are sometimes called “third party policies.” NOLO Encyclopedia of Everyday Law 2006.

• Collision insurance coverage: component of car insurance that pays for damages to the insured vehicle that result from a collision with another vehicle or object. Collision insurance generally covers the amount of damage over and above an amount that the insured person must pay, called the “deductible” amount. NOLO Encyclopedia of Everyday Law 2006.

• Uninsured motorist coverage: compensates you for any injuries resulting from a collision with an uninsured motorist or a hit-and-run driver. Damage to your vehicle in such a situation is compensated by the collision coverage portion of your car insurance. NOLO Encyclopedia of Everyday Law 2006.

• Under insured motorist coverage: option in an insurance policy which covers one for property damage and bodily injury caused by another motorist who has insufficient insurance coverage to cover the damages suffered by the injured party. This type of coverage compensates the injured party for the difference between the injury suffered and the liability covered by the insurance of the driver at fault.

If you have automobile insurance, most of the premium that you pay goes toward comprehensive coverage to cover damages to your vehicle. Very little of the premium is applied toward liability coverage.

Uninsured and under insured motorist coverage are important options to have included in your policy. Compared to the cost of comprehensive coverage, uninsured and under insured motorist coverage is relatively inexpensive. Uninsured/under insured coverage protects you from negligent drivers that are not insured, or are under insured.

For example, say that you are injured in a wreck caused by a person we’ll call the wrongdoer. You have $75,000 in medical bills due to injuries from the wreck. The wrongdoer has liability coverage in the amount of $25,000. You have under insured motorist coverage in the amount of $100,000. Obviously, $25,000 will not cover your medical bills. If you are able to recover the $25,000 from the wrongdoer’s insurance coverage, (also known as the “policy limit”), you will be able to pursue under insured coverage from your own policy for payment of the remaining $50,000 in medical bills. If on the other hand, you do not have under insured motorist protection, you will be personally responsible for paying the remaining medical bills even though the wrongdoer was at fault and put you in that position.

Why not sue and pursue the wrongdoer personally for an amount in excess of the wrongdoer’s policy limits? Contrary to popular belief, uninsured and underinsured wrongdoers are rarely personally pursued by a plaintiff’s attorney to collect a judgment. This is true for several reasons. First, the wrongdoer might be bankrupt or lack assets to pay the rest of the medical bills. While Allstate Insurance Company, via its advertisement, implies that a couple will lose their home if one of them causes a wreck and is uninsured, this is incorrect. Indiana does not recognize joint and several liability for spouses. Therefore, if a husband causes a wreck, his wife is not responsible and any property which they own jointly (home, auto, bank accounts) are not legally available to pay for the obligations of the husband.

If someone has been sued in a civil case for personal injuries, you can bet that they have insurance available to pay any judgment which might be entered against them. Why? Attorneys and their clients are not going to waste their time, effort and costs of pursuing a case against someone who does not have insurance coverage due to the difficulty, if not impossibility to collect.

1 Indiana Department of Insurance


Engineering Report Showed Nguyen Home Destroyed by Wind, but State Farm Denied Claim Anyway

Last week marked the beginning of hurricane season 2006. With sixteen major storms predicted this year, there are many victims from the hurricanes last year who are still waiting for payment from their insurance companies. CNN highlighted one of these families last week: the Nguyens of Mississippi lost their home, along with the rest of their neighborhood, last year in Hurricane Katrina.

Their insurance company, State Farm, is refusing to pay for the damage, claiming that it was not caused by the wind but by the flood, which is not covered under their insurance policy. But there are two reports from an engineering firm that conclude that the damage was caused by wind. The reports even cite two witnesses who saw another house picked up by the wind and thrown into the Nguyens’ home. This firm submitted their reports to State Farm, but when State Farm did not like the findings of the reports the insurance giant recruited another firm to create a report with more agreeable conclusions: that the damage was caused by flood.

The Nguyens have joined a lawsuit alleging that State Farm pressured staff and contractors to conclude that damage was from flood and not from wind, as well as alleging that the company destroyed early engineering reports that had concluded damage was caused by wind damage.

State Farm has a history of using contractors to undervalue and even deny legitimate claims. In 1999, Oklahoma City was devastated by the worst tornado in history. Now, seven years later, a jury found State Farm had used an engineering company to underestimate the value of the damage to homes, as well as to conclude that the damage to homes was not caused by the tornado so that they could then deny the claim.

Read more about the Nguyens’ case.

On the Coast

Last year, Americans learned that just because you’re a loyal policyholder who’s paid premiums on time for years doesn’t mean you can count on your insurer to treat you fairly after you’ve been devastated by a natural disaster. Many victims of hurricanes found that their insurance representatives were unavailable to be reached, in some cases simply not responding to claims for 30 days or more, or refusing to provide temporary living expenses for which policyholders had paid.

In Mississippi, instead of helping residents, some insurance representatives tried to trick residents into signing waivers that would later make it easier for the insurance companies to deny their homeowners’ claims, according to a lawsuit filed by the State of Mississippi. And in Texas, Allstate insurance company refused to cover temporary living expenses that policyholders had paid for unless the homeowners returned to their homes, documented the damage and sent the information to the company. But for many homeowners who had evacuated, returning was impossible.

Lessons Learned from Hurricane Season 2005

By the Numbers

$44.8 Billion: Record profit of insurance companies in 2005

18.7%: Increase in insurance industry profits over 2004

$427 billion: Total insurance industry surplus

[Source: “Insurers Saw Record Gains in Year of Catastrophic Loss” Los Angeles Times]

In the News

Visit the ATLA Press Room for information about other important issues.

State Farm Sued for Coverage of Katrina Losses

Gulf Coast homeowners assail an engineering report that justified denying damage claims

Associated Press, 5/10/06

“A lawsuit filed Tuesday by nearly 700 Gulf Coast homeowners accuses State Farm Insurance Cos. of using a ‘one-size-fits-all’ engineering report as the basis for refusing to cover damage to homes destroyed by Hurricane Katrina. The suit alleges that the insurer denied many of the homeowners’ claims without investigating whether Katrina’s wind or water was responsible for damage to their homes. Instead, the suit claims, an engineering firm hired by State Farm drafted a generic, ‘one-size-fits-all’ report that concludes all damage to homes on Mississippi’s Gulf Coast was caused by ‘storm surge’ and not hurricane-force winds.”

State Farm shreds records

Biloxi Sun Herald, 6/6/06

“State Farm has been shredding records weekly at the Biloxi Catastrophe Office and on various schedules at other South Mississippi offices since Hurricane Katrina hit, according to the company that does the work, Shred-it. … But the Biloxi employee said in an interview with the Sun Herald that at least one shredded document was an engineering report that went missing after Attorney General Jim Hood subpoenaed such State Farm reports for a grand jury investigation. … ‘I can tell you I was in a file that was supposed to have an engineer report. No one could find the engineer report and the person I was working with was told it had been shredded because they’d decided to scan it into images. This was after (State Farm) had been subpoenaed by Jim Hood for the grand jury to produce all the engineer reports. I know in that particular case, they shredded it.'”

State Farm penalized in suit over tornado claims

Verdict could affect similar lawsuits involving Katrina

CNN, 5/26/06

“State Farm acted ‘recklessly’ and ‘with malice’ in handling insurance claims from dozens of families whose homes were damaged when a wave of tornadoes, including the strongest in recorded history, swept through Oklahoma in 1999, a jury has decided. … According to the lawsuit, State Farm hired Texas-based Haag Engineering, which intentionally undervalued damage to homes or claimed the damage was caused by other factors — like faulty construction — instead of tornadoes.”

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