Part of the confusion that comes in the aftermath of a car accident is the unfamiliar terminology an insurance company uses. Things like “liability” and “coverage” seem straightforward but when used in the insurance context, these terms involve so much more than an ordinary person might understand. Navigating an insurance claim gets even more confusing when the person discussing the claim uses the words “liability” and “coverage” interchangeably, when they are certainly not the same thing. While the investigation of liability and coverage do share some characteristics, the existence of both is necessary in order to successfully bring a claim for compensation under an insurance policy. If either coverage or liability is not established, you, the victim, could be stuck holding the bag.
After an accident takes place and a claim is filed, the insurance company first investigates the facts of the accident to determine which party was “at fault.” Your claim is assigned to a person or team whose job it is to review the police report, talk to the drivers, passengers, and any witnesses to compare stories to figure out what happened. Sometimes, this analysis is simple, as in a rear-end impact claim; other times, the task is much more complicated, as when there is a dispute as to which vehicle had a green light signal. After concluding its investigation, the insurance company will make a decision whether it will admit that its insured caused the accident. If the investigation shows that the insured caused the accident, the company accepts liability, meaning it agrees and acknowledges that the insured was at fault. This is called “accepting liability.”
Even once “liability is accepted,” your claim could still be denied if the insurance company determines that the person or vehicle involved in the crash should not be protected by the insurance policy. Coverage means the scope of the risk covered by insurance, or more simply put, it is what the insurance company agreed to pay for in the policy purchased. When investigating coverage, the adjuster or adjusters will compare the facts of the accident with the language in the policy to make sure this accident qualifies as the kind of accident the insurance company agreed to pay for in the policy. If the facts of the accident align with the policy, the insurance company will verify that there is coverage. After both liability is accepted and coverage have been verified, only then will insurance discuss payment.
Coverage creates confusion because the existence of a policy, and acceptance of liability, do not guarantee coverage, which means you can still be left without compensation even if the other driver is at fault.
Insurance companies want to deny coverage – this is one of the ways they get away with not paying fair compensation on claims. Insurance companies will justify their refusal
to payout on claims for which they are liable – one of the most common justifications for denying coverage is the “policy exclusion.” Policy exclusions are a list of scenarios and fact patterns that the insurance company explicitly says they will not pay for. If during the coverage investigation, the company is able to wedge into one of the exclusions the facts of the accident, or have evidence the driver failed to meet a condition no matter how small or seemingly unrelated, the insurance company will deny coverage and refuse to pay you, the victim. When an insurance company denies coverage, your car does not get fixed, your medical bills do not get paid, and you most often cannot get your just compensation for your injuries.