Should An Auto Accident Equal Financial Ruin?

Four months ago, the Smiths, a family of four, were driving to dinner one evening. They were broad-sided in an intersection by a car that ran a red light. After striking the Smiths’ vehicle, this other car careened across the intersection and struck a third car head-on.  All four of the Smiths were injured and each was taken by ambulance to a local hospital. Two occupants of the third car were injured, as well. The driver who caused these two collisions was insured, with coverage in the minimum amounts required by Arizona law. The Smiths are now bankrupt. Sound fair?

Auto-Accident-Equal-Financial.The Smiths are a fictional family, of course, but their plight is not. Current estimates are that as many as two million bankruptcy filings per year are precipitated by families being saddled with medical bills they cannot afford to pay.  A significant number of those medical/financial crises are the result of accidental injuries. “But the at-fault driver had insurance!” you say.  “Didn’t it pay the Smiths’ bills?” you ask. There simply wasn’t enough insurance money to go around.

The required levels of auto liability insurance in our state are 15/30/10, which is short for: $15,000 maximum coverage per person for bodily injury, $30,000 combined maximum coverage for ALL bodily injury claims, no matter how many, and $10,000 maximum coverage for all property damage claims. This means that, in our example, the six injured claimants had to divide $30,000 among them as TOTAL compensation for their injuries. If any of the injured occupants suffered more than minor injuries (a fractured arm, for example), that person could produce $30,000 in medical bills all by themselves. In addition, this minimum policy only provides a total of $10,000 to cover all of the damage to both cars.  Again, not nearly enough, by today’s standards.

Nationally, Arizona ranks among the bottom ten states for lowest required liability limits. On the other hand, Arizona ranks ninth highest in average cost per hospital visit. So, since the typical cost of an ambulance ride can easily be as much $2,000, and even a routine emergency room evaluation and testing can run upwards of $5,000, it’s unlikely our little family even got out of the hospital before racking up $25,000 – $30,000 in charges! Then there is the matter of their car. Suppose we assume that the insurance carrier gave them $7,500 of the $10,000 it had available to pay property damage claims. But assume further that their SUV was a total loss, and they had a remaining note of $12,000 they owed on it. That $7,500 would go to the bank, not the Smiths; they would be left with no car and a remaining debt of $4,500. Bankruptcy Court, here we come.

Simply put, Arizona’s current insurance requirements are woefully inadequate to protect innocent victims of car crashes. The law is intended to insure that the responsible party is the one who bears the expense caused by his or her negligence. But these unrealistically low limits too often mean that Arizona families, through no fault of their own, are forced into bankruptcy following a collision with a driver who is in full compliance with our insurance laws. It’s well-past time to update those laws.  Several of our lawmakers have expressed the intention to introduce bills, in the coming legislative session, to raise the minimum auto insurance limits in our state. We at MWK strongly support such an effort and encourage all of our readers to contact their representatives and get behind this effort. It’s a matter of simple fairness.