(Written offline on Sunday, 2 September)
When I logged in in San Juan, I was able to approve a comment to my vacation-queued post on mandatory auto insurance, but I didn’t have a chance to respond.
Declan Lavelle observed:
From the European perspective it is strange to me to hear that Motor Insurance is not mandatory across the US. It has been mandatory for many years in the EU, with a “Green Card” system to extend cover when driving in another EU state.
What would happen in the US where an individual is severely injured by an uninsured driver? Can they claim against the state as a last resort?
In the U.S., there does exist law common to (I think; I’m not going to attempt to Google via satellite) all states that requires the owner and operator to be financially responsible for damage done through the operation of their vehicles, as a condition of registration and/or obtaining a drivers license.
In most states, this comes in the form of law requiring that drivers carry auto insurance or post a sizable bond. In many (most? it’s been awhile since I did state reporting…) of those states, insurers are required to provide the state with information on who is insured, which vehicles are covered, and who is being canceled when cancellations occur. And, in most states, it’s impossible to register (or get license plates for) a vehicle unless proof of insurance is provided.
Enforcement of those laws varies. And, mandatory insurance laws don’t exist in all states; a few states take a more libertarian approach and permit car operators to decide for themselves whether they’ll accept the financial risk of going uninsured.
Also, it’s a standard provision in auto insurance contracts sold in the States today that if at least minimum coverage is bought in your home state, your coverage is extended to provide the greater of those limits or the limits in the state (or Canadian province) you’re operating your auto in. This is different than what I suggested in my modest proposal, where I’d limit “minimum” coverage to the borders of the state, due to the state acting as an underwriter for basic coverage, and the possibility of other states not following a similar scheme.
The idea of a state being sued for failing to enforce their mandatory insurance laws is intriguing. However, generally government agencies have a certain degree of immunity in at least certain situations. I can’t imagine that such a strategy would work…and our court systems are bogged down enough with Americans’ love of litigation that such a strategy would probably best avoided. (Relevant anecdote—my wife was disabled in a car accident 5½ years ago, and we’re scheduled to go to trial in October 2008.)
Instead of holding the state liable, uninsured/underinsured motorist coverage is available as part of auto insurance contracts (although the name and exact operation of the cover can vary somewhat from state to state). With this coverage, if an uninsured driver is liable for damage to you or your auto, but either lacks insurance, or doesn’t have enough coverage to indemnify you, your UM/UIM cover will pick up the slack up to the limits of liability. Without that coverage (or if the damage is in excess of your UM/UIM limits, as is the case in my wife’s accident), you’re left suing the at-fault driver, and hoping that you can recover enough to pay the bills.