UPDATED: Mar 13, 2020
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Lawsuits are a common part of the car insurance claims process in the United States. But when you need to pay legal fees, will car insurance cover your costs? Or will you need to pay legal fees out of pocket?
Today, we’re explaining everything you need to know about whether or not car insurance covers legal fees, including how much legal fee coverage you can receive and which type of car insurance covers legal fees.
Yes, Auto Insurance Covers Certain Legal Fees
Liability insurance consists of two basic components, including:
Bodily Injury Liability Coverage: This covers the medical bills, lost wages, and other expenses of anybody injured as a result of an at-fault driver’s actions. It can also cover legal fees if the injured party files a lawsuit against the at-fault driver.
Property Damage Liability Coverage: This covers damages resulting from a covered accident in which you were at fault, including the other party’s vehicle repair or replacement costs or any other damage to someone else’s property.
How Do Car Accident Lawsuits Work?
Car accident lawsuits can work in two different ways. You can sue another driver. Or, you can be sued.
- If you are being sued, then your car insurance company should cover your legal costs and hire an attorney on your behalf.
- If you are suing someone, then you need to find your own lawyer and pay your own legal fees. However, if you win the lawsuit, then you may be able to collect these legal fees from the at-fault party.
If you are accused of causing a car accident, then the injured party may file a lawsuit against you. This is a personal injury lawsuit: the other party has incurred personal injuries as a result of your actions, and you are required to pay for these injuries and any related damages.
In this situation, your car insurance company will usually hire a lawyer to defend your case in court.
Alternatively, if you were injured in a car accident caused by another driver, then you may want to file a lawsuit. In this situation, you will need to hire a car accident attorney yourself. Your insurance company will not cover your legal fees.
Car Insurance Companies Have a ‘Duty to Defend’
Most car insurance policies contain specific language explaining how lawsuits work.
Your car insurance policy may state that your insurer will provide a lawyer for you if you get into an accident and are sued for damages resulting from the crash. This is part of the insurance company’s ‘duty to defend’. This ‘duty to defend’ can be found in all different types of liability insurance policies.
Your Policy May Have Exceptions to the ‘Duty to Defend’
All insurance policies have exceptions to their ‘duty to defend’. Because of these exceptions, your insurance company is not required to provide a lawyer in certain situations.
Common exceptions include:
You Failed to Notify the Insurer of the Claim or Accident
If you fail to notify your insurance company of the claim or accident within a certain time period, then your insurance company is not required to provide a lawyer. The insurer’s ‘duty to defend’ is voided.
With some insurance companies, this time limit is as short as 5 to 10 days. You must notify your insurance company within this time period to be covered for future lawsuits.
However, there may be exceptions to this exception. If you were physically incapacitated after the accident, for example, and were incapable of notifying your insurer, then your insurer may extend these time limits.
Generally, it’s in your best interest to notify your insurer of an accident or claim as soon as possible.
You Intentionally Caused a Car Accident
If your intentional actions caused a car accident, then your insurer’s duty to defend may be voided. Insurance companies provide coverage for negligent actions – not intentional actions.
Your Car Accident Damages Exceed Policy Limits
Insurance companies are only required to provide coverage up to the limits of your policy. If your car accident exceeded these limits, then your car insurance company is not required to pay for any future legal expenses.
In general, once the insurer has paid for damages up to your policy limits, the insurer has no further duty toward the insured. There is no requirement to pay any further money to resolve claims, for example, nor is there a duty to continue to provide the insured with a lawyer.
Let’s say you have $100,000 of personal injury liability coverage. The other driver and his passengers are seriously injured in an accident you caused. Their medical expenses add up to $105,000. Your insurance company pays up to the limits of your policy ($100,000), and you are required to pay the additional $5,000 out of pocket. Then, the other driver and passengers sue you for pain and suffering resulting from the accident. At this point, your insurance company has no obligation to hire a lawyer on your behalf.
Your auto insurance policy will generally cover legal fees after an accident, assuming you are the one being sued (and assuming you have not exceeded your policy limits).
If you are filing a lawsuit against another driver, then you may have to hire your own personal injury lawyer. Your insurance company will not cover your legal fees in this situation, although you may be able to recover those fees from the other driver.