Many drivers mistakenly believe that if the insurance company has already paid out damages, the matter is over and cannot be legally pursued further. However, that is not always the case.

This article will explain why insurance payments don’t always mean the end of liability, how release forms work, and what steps you can take to protect yourself if damages exceed coverage.

How Did Insurance Pay and Why Does it Matter?

The method in which a claim has concluded is incredibly important when determining if a payment from an insurer has legally resolved the claim. It is a common misconception that once an insurer has paid out, there are no further actions that can be taken.

However, that is typically only true if a valid legal document has been signed that releases the at-fault party and their insurance company from any further legal obligation regarding the accident. This is often known as a release of all claims form or a liability waiver.

Settlement-Based Resolution:

Most claims in Nova Scotia are resolved by settlement negotiations between the injured party (or their lawyer) and the at-fault driver’s insurance company.
These negotiations typically take place with the goal of reaching a resolution without going to court.
In exchange for the payout, the injured party is generally required to sign a release form.
This bars any future lawsuit by the injured party, even personally against the at-fault driver.

Court-Ordered Judgement:

Should a claim proceed to court and be successful, a formal award of damages is issued against the at-fault driver.
If the award is within the at-fault driver’s policy limits set-out in their contract, their insurer will pay the judgement.
However, if the award exceeds this policy limit, the insurer will only pay up to those limits, and the at-fault driver may become personally liable for the rest.

In Canada, the right to bring a civil action (sue) is a fundamental part of our legal system that allows individuals to protect their rights and seek compensation. Because of this, a payment from the insurer alone does not automatically waive the injured party’s right to pursue a further civil claim. That right is only extinguished if a document is signed that explicitly does so.

For the at-fault driver, these releases can serve as a contractual shield against further personal lawsuits. Because of this finality, for the injured party, it is essential to proceed with caution before signing any legal documents. Consulting a personal injury lawyer prior to signing is strongly recommended.

Over-Limits Claims and How They Impact an At-Fault Driver

When the value of a claim exceeds the third-party liability coverage available, it becomes “over-limits”.

In Canada, third-party liability coverage is mandatory for all drivers. The minimum required amount differs by province, but in Nova Scotia it is $500,000, and in Newfoundland and Labrador, New Brunswick, and Prince Edward Island it is $200,000. Drivers could always have a higher policy limit than these minimums, but that also comes with an increased premium. Accordingly, there are many drivers who have exactly the minimum amount of coverage, no-more, no-less.

This mandatory coverage protects at-fault drivers from the financial liability owed to injured parties in an accident. It is incredibly helpful to both the insured and the individual that was injured; it prevents the insured from having to pay large amounts of money in compensation, and it provides the injured party with a guarantee that if the case escalates to court and damages are ordered, there will be a payout.

Though the insurance company is obligated to pay on behalf of their insured even if the case proceeds to litigation, there is an important caveat to be aware of: the injury claim is still legally against the at-fault driver.

This means that if you were found at-fault for a car accident, legal actions taken are associated with your name, not your insurance company. Your insurance company will essentially step into your shoes and act as your lawyer during the claim, including prior to court through negotiations with the other party, but the lawsuit and its outcome are still personally linked to you as the at-fault driver.

Your insurance coverage limit is the highest amount that your insurance company is contractually obligated to pay on your behalf in the event of your involvement in an at-fault collision:

In Nova Scotia, if an at-fault driver carries the minimum level of insurance, then they are personally responsible for injury claim awards that exceed the $500,000.
In the event of court-ordered damages, accident victims will receive their compensation from the at-fault driver’s policy, and then can choose to pursue legal action against the driver personally to recover the excess.
This may be achieved through several processes, such as wage garnishment, asset seizure, or payment plans.

Examples Where An At-Fault Driver Could Be Sued After a Car Accident

John carries the minimum amount of insurance in Nova Scotia. While driving, he was checking his phone and hit Jane, a pedestrian at a crosswalk. Jane was seriously injured and will never return to her high paying job nor her prior quality of living. At trial, Jane is awarded $800,000. Jane is entitled to $500,000 under John’s insurance policy, but now must seek the remaining $300,000 from John personally.
If the same scenario as above occurred, but John instead hit and injured four pedestrians, John’s insurance company will still only payout $500,000 and John is liable for any excess. If each pedestrian is awarded $200,000, the total amount awarded is $800,000 and John is responsible for the additional $300,000. This is because the coverage limit is per accident, not per injured claimant.

How to Protect Yourself From an Underinsured Driver?

Because any money left unpaid under their policy must come from the at-fault driver personally, accident victims may be left without much-needed compensation should they happen to be hit by a driver without considerable assets or income.

As an accident victim, realizing that the at-fault driver does not have enough coverage to provide you with the compensation that you are entitled to is an additional unneeded stressor that can worsen an already awful situation.

A proactive approach that helps you avoid this situation is purchasing an endorsement from your own auto insurance as an additional form of coverage beyond your base policy. The S.E.F. 44 endorsement provides a safety net to accident victims by increasing the insurance dollars available when satisfying a claim should you be injured by an underinsured driver.

This adds an extra layer of protection which kicks in only if the at-fault driver would have been responsible for paying the excess damages. Instead of seeking money from the driver, who may not have sufficient money or assets, your own insurance company will step in and pay the excess up to your purchased limit.

Cases Over Policy Limits

Whether you are the at-fault driver or the injured party, over-limits claims are risky and carry complex legal consequences. At-fault drivers in this situation should ensure that their insurance company has appointed counsel so that their interests are properly represented.

As an accident victim, any claim nearing or exceeding the limits of coverage available is almost always due to major wage loss or debilitating injuries. It is essential to consult an experienced personal injury lawyer early before signing any documents or accepting a payout. High-value claims require considerable expertise to prevent miscalculation or poorly appraised losses.

The team of lawyers at NOVA Injury Law are well equipped to guide you through this stressful time. To learn more or to schedule a free consultation regarding an insurance claim, contact NOVA Injury Law at (782) 824-5197 or info@novainjurylaw.com.