Third-Party Insurance Claims

Third party insurance claims are not as difficult to understand as they may sound.

When you file a car insurance claim, it can be either a first party claim or a third-party claim. A first party claim involves your insurance company, while a third party claim involves the insurance company of the other driver in an accident. The type of car insurance you carry, and the type of auto accident, may determine your decision to file either a first or third-party claim.

Why File a Third Party Claim?

You should take this action when you feel the other driver caused the accident. This means you need to contact that driver’s insurance carrier, let it know an accident occurred with one of its policyholders, and provide additional details concerning the incident.

If the third-party insurer agrees that its customer caused the accident, it will pay for your accident expenses, and your insurer will not be involved – providing, of course, the other driver carries the proper type and amount of protection.

If that is not the case, you can file a claim with your own carrier – if you have underinsured coverage – to try to get money for your accident bills. Alternatively, you can sue the other driver, and attempt to collect the money through the court system.

Before the third party carrier sides with your case, it will investigate the accident to determine if their insured was responsible for the crash, and to what degree.

The Downside of Third Party Claims

While you may be used to working with your own auto insurance company, and it can get tough when you have to communicate with a third-party insurer. After all, you are not a customer to them and haven’t paid them a dime in premiums. A third-party insurer will protect its own interest – as well as that of their own customers – before yours.

So, extracting the money rightfully owed to you can be a challenge and a test of your patience. It helps, though, if you have strong supporting evidence about the accident. For example, a copy of the police report citing the other driver, or eyewitnesses who confirm your version of the event.

However, even with this, you may experience delays in getting the other carrier to move in a timely manner. This could be due to the other driver failing to file a claim, or taking a while to do so. Alternatively, it could happen if the insurance company handles the claims process at a deliberate pace.

Should You Subrogate?

If you are unhappy with the speed of the claims action, you can choose to involve your insurer by filing the claim against your own policy (assuming you have the appropriate coverage).

You will have to pay the applicable deductibles, let your insurer go through its own claims process, and allow your insurer to pay the money due to you.

If your carrier feels the other party is at fault, they may request that you subrogate (or assign) your rights under your policy so they can try to collect the money from the other carrier or the other driver.

If your insurer succeeds – and it usually will – they will get back the money they paid to you. Moreover, they will often collect enough money to refund your deductible payments. Your insurance premiums will not go up because of this action.

Characteristics of a Third-Party Claim

There are some characteristics of a third-party car accident claim that are universal. First and foremost, a third-party claim does not involve a contractual obligation between the injured party and the insurance company. This sounds more complicated than it really is. Simply put, a third-party claim is the legal name for making a claim on another’s auto insurance policy. Exactly how and when such claims can be made, vary based upon the presence (or lack thereof) of no-fault laws, but the overriding principle remains constant.

Making a claim with “the other driver’s” insurance company? That is a third-party claim. Driving a company car and sustain an injury? You are making a third-party claim there, too. Injured while driving your own car in the course of your job? A third-party claim with your employer’s insurance company would be your mechanism for recovery of medical and repair costs. Any claim made to an insurance company other than your own is considered a third-party claim.

Third-Party Car Accident Claims in “Fault” States

Third-party claims are much more prevalent in “fault” states than in “no-fault” states. While no-fault generally require an injured party to first recover from their own insurance company, fault states have no such requirement. In fault states, if you sustain an injury to your person or damage to your vehicle in a car accident you can make a claim with “the other driver’s” insurance company — provided they were at fault for the accident.

A third-party claim of this type can be very simple or extremely complex depending upon the facts and injuries of a particular accident. If fault is not in question, insurance adjusters will normally attempt to resolve third-party claims quickly and with a minimal expenditure of time. Normally a few brief interviews, a cursory review of medical records or repair records and a thorough understanding of any law enforcement reports will result in an offer of settlement. However, in cases where fault is disputed, or where injuries are significant, the road to recovery can get bumpy in a hurry.

In third-party car accident claims where fault is in dispute, lengthy investigations can be the norm. Insurance adjusters will investigate the claim thoroughly, often hiring outside parties to conduct interviews, take statement and review all records (medical or otherwise) pertaining to the case. You may even need to attend an independent. The adjuster will then make his or her own determination as to fault and the settlement value of the case. It is not uncommon for insurance adjusters to settle cases where the injured party could potentially be seen to be at fault for their own injuries or damages because the cost of settlement is often far less than the cost of a formal lawsuit.

Third-Party Car Accident Claims in No-Fault States

Third-party claims occur with less frequency in no-fault car insurance states, where you first look to your own insurance company to recover, regardless of who is actually at fault for an accident or injury. Generally, no-fault states have mandatory minimum insurance requirements, meaning that every driver carries a statutorily dictated minimum amount of insurance. If, after you have made the appropriate claims to your own insurance company, your claim meets your state’s monetary threshold or “serious injury” threshold for stepping outside of no-fault, you may be able to initiate a third-party claim.

One of the most common third-party claims in no-fault states is the “mini-tort” claim. In no-fault states such as Michigan, “mini-tort” laws allow you to claim a small, statutorily-mandated amount of money from “the other driver’s” insurance company. Most no-fault insurers will require you to collect the mini-tort amount to offset whatever they are obligated to pay. Another common instance of a third-party claim in a no-fault state is an employment-related claim. Injuries or damages sustained in the course of your job or in a company vehicle often result in third-party claims.