This is the most forceful question a policy holder will ask after getting involved in a vehicular accident. He could go on and also ask what the insurance company is compelled to pay if his car was in the accident? What if he was driving another person’s vehicle at the time? What if a person was driving his automobile without getting his permission? It can get very confusing for the insured person.
An insurance company will pay for property damage and personal injury if the facts of the case warrant it. The agreement in the policy is the part of a fault-based policy that explains in general terms what the insurer will pay for in whatever circumstance. This agreement has plenty of conditions, exclusions and limitations.
An insurance policy uses a lot of jargon, but in plain English it is saying that:
Using, doing maintenance, or mere owning a vehicle or utility trailer, an insured person was found responsible for bringing about damage to property and/or physical injury to some other person. The insurer will compensate for the damages. The insurer, though, will not pay if the injured party files a lawsuit for punitive or exemplary damages.
For instance, you got drunk and hit a taxicab while running through a red light. You are cited for a fifth driving-under-the-influence violation. Both the driver of the taxi and his passenger were injured in the accident and file a claim with your insurer for damages. The driver demands that his cab be fixed (property damage). The driver lets a chiropractor treat his back, and the passenger’s cuts were stitched in the hospital (both bodily injuries).
You were found to have caused all the damage so your insurer pays for the taxi driver and his passenger’s injury treatment and repair to the taxi. Because of your DUI infraction, the cab driver sues you for punitive damages. This time your insurer washes its hands of the whole affair.