Minimum Limits, Maximum Damage
Devon carries the Nevada minimum auto policy: $25,000 per person and $50,000 per accident for bodily injury, and $20,000 for property damage. In June he looks down at his phone in stop-and-go traffic on US 95 and rear-ends a two-year-old sedan. The other driver has a neck injury treated at a trauma center, with medical bills and lost wages totaling about $60,000. Her passenger has $10,000 in medical bills. The sedan is a total loss at $32,000. Devon's own car has $6,000 in damage and he carries no collision coverage. He has $4,000 in savings. The other driver's attorney calls in August demanding payment, and Devon has not yet filed anything with the DMV.
1. How much will Devon's insurer pay, and how much will Devon owe personally?
Read the worked answer
Apply the limits per person, per accident, and per category.
- Bodily injury: the other driver's $60,000 claim is capped at $25,000. The passenger's $10,000 is paid in full, because $25,000 plus $10,000 equals $35,000, still under the $50,000 per-accident bodily injury limit.
- Property damage: the $32,000 total loss is capped at $20,000.
Total from the insurer: $25,000 + $10,000 + $20,000 = $55,000.
Devon personally owes the unpaid balances: $35,000 on the driver's injury ($60,000 minus $25,000) plus $12,000 on the car ($32,000 minus $20,000), or $47,000. His own $6,000 is not covered because he declined collision. His $4,000 in savings does not come close to the gap, which is the practical lesson about buying minimum limits.
2. What must Devon do about reporting the crash, and how should he handle the attorney's call?
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He should report the crash to DMV. Nevada requires a report when a crash causes injury or damage above the state threshold, and it is due promptly - generally within about 10 days; the form is on the DMV site. Missing that is independently punishable by suspension and can be used against him.
He should also notify his insurer immediately, even though the attorney called him rather than the company. Insurers handle claims and defend their insured; delay or independent negotiation can jeopardize coverage. He should not admit fault in writing, not promise payments, and not discuss fault with the other side's attorney. The right response is to give the attorney his carrier's claim information and give a factual statement to his own adjuster.
He should also expect his premium to rise at renewal; that is a budgeting problem, not a reason to avoid the claim.
3. What happens if Devon cannot pay the $47,000, and what should he do now?
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If he cannot pay, the other driver can sue and take a judgment. Under Nevada financial responsibility law, an unsatisfied judgment from a crash can lead to suspension of his license and registration until he satisfies it or enters an approved payment plan, and he may have to file proof of financial responsibility, such as an SR-22 certificate, for three years. That raises his insurance cost and restricts his driving.
Practical steps now:
- Cooperate fully with his insurer and provide records of income and assets if a payment plan becomes necessary.
- Do not ignore the attorney or any court papers; a default judgment is worse than a negotiated plan.
- At renewal, price higher limits - minimum limits are cheap because they cover so little.
- Avoid any further violation or crash, which would add a separate suspension on top of the financial-responsibility action.