On April 9, 2009 I posted a general overview of auto insurance in Tennessee. Today I am going to focus on the "liability" portion of the policy. Liability insurance is required in Tennessee on any motor vehicle operated on the public highways. This was mandated by the Tennessee Financial Responsibility Law of 1977 at Section 55-12-101. A motor vehicle is defined in section 55-12-102 (6) as
“Motor vehicle” means every self-propelled vehicle that is designed for use upon the highway, including trailers and semitrailers designed for use with motor vehicles, and every vehicle that is propelled by electric power obtained from overhead wires but not operated upon rails, except traction engines, road rollers and farm tractors. “Motor vehicle” does not include “motorized bicycle” as defined in § 55-8-101;
Obviously this is a very broad definition.
Liability insurance pays for the damages you cause if the accident is your fault up to the limits of your policy. I often have my clients tell me they have "full coverage" an assume ALL damages are covered irregardless of the dollar amount. Wrong. The insurance company is only responsible for the costs of hiring a lawyer to defend you and the damages up to the policy limits. As explained below this could leave you hanging in a serious wreck.
One of the largest expenses an insurance company has is the cost of defense. Thus, once a basic policy is purchased, the cost to increase that policy above the state required minimum is small compared to the initial premium. That is one of the reasons I recommend in ALL cases a minimum of $300,000 in liability limits. The second, but more important reason is that the higher the liability limits the more uninsured motorist coverage you can purchase. (More on that in a later post.)
What are your duties when you are involved in an accident? Tennessee Code Section 55-12-104(a) requires that if there is an injury, death, or more than $400 in property damage an accident report MUST be filed with the department of Safety within 20 days of the wreck. That report requires you to list your insurance policy. If you fail to file the report or do not have liability insurance Section 55-12-105 requires the revocation of both your license and the registrations on all vehicles registered to you. Now your wife and children may be driving vehicles that are not registered and you are driving on a revoked license. The last ticket one of my clients was issued for driving without insurance cost him $290!!!
If injury results and the damages are not paid within 60 days as required by Section 55-12-118 of the code then your license and registrations can be revoked. Yet you said "I had full coverage!" Not if the damages exceed your policy limits. The insurance company will pay the limits and you will have to pay the difference to keep your drivers license and registrations. I hope now you see why the higher limits protects you.
Often I have clients who are afraid to turn in a claim or report an accident. They think the insurance company can automatically cancel them. This is a myth. Code Section 55-12-122 (e)(1) states:
It cannot cancel you later unless you were at fault.
My experience is that the longer you are with the same insurance company the less likely they are to cancel you for an at fault accident. Do not jump from one company to the next year after year to save a few bucks. It may come back to hurt you in the future.
If you have any questions please feel free to call me at 615-251-0005 or drop me an e-mail at firstname.lastname@example.org.