How laibility coverage applies to passengers

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MIKE FELDER'S INSURANCE COLUMN ...But seriously folks.... -------------------------------------------------------------------------------- For the most part insurance, and insurance articles, rank somewhere in the top ten of the most boring things to read. Over the years I have tried to add some humor to make the articles a little easier to get through. From those who I have spoken with, they seem to appreciate that fact. However, there comes a time when humor won't drive the facts home. This article is going to be "one of those." The other day a highly experienced cyclist called me and told me about an accident he recently had. While travelling down a familiar road to him, he lost control of the cycle due to a "dip" in the road. Both he and his passenger were thrown from the cycle at over 35 miles per hour. The passenger had the misfortune of striking two semi immovable objects...a guard rail and a traffic sign post. Neither of the objects completely stopped her forward motion. The forward motion stopped some sixty feet later and some distance down the side of the mountain. Injuries to both individuals were extensive. As of this writing, she still is in intensive care. The future holds the prospect of several operations and rehabilitation. The cyclist was concerned about how his liability insurance would cover the expense of all this. After asking about his coverage, he informed me that he purchased theft coverage, collision coverage and liability coverage. He told me that he always kept his cycle immaculate and had a great deal of accessories so he always paid extra for a substantial amount of accessory coverage. Upon questioning him about the limits of liability he purchased, he answered that he got "just what I needed to be legal." In other words, $15,000 per person!!, $30,000 per accident, $5000 property damage. I am sure that the sign post and guard rail will be less than the $5000 property damage, so we are safe there. Due to the extensive amount of accessory coverage, the bike will be handled equally as well. However, ICU (Intensive Care Unit) has the nasty habit of costing between $2600 (definitely low end) and $5000+ PER DAY!! And that is just for the room rental!! That doesn't include doctors, X- Rays, medication, and so on. In short,his liability coverage for his passenger ($15,000) was probably already exhausted by the time he called me to ask the question!! That fact led to the real hard question. "What happens if the hospital bill gets up to $80,000 or $100,000?" That's when things can get real bad. The hospital will no doubt be billing the passenger for all her costs. She will most certainly be looking at the owner of the cycle for payment on these items. It probably goes without saying that he doesn't have an extra fifty, sixty or seventy thousand just laying around. His options at that point become something like, 1) make a payment plan with the hospital, 2) see if he has some other type of insurance that will pay it, or 3) ignore it and hope that it goes away. Several people I have talked with hold a belief that their homeowner's insurance or boat insurance or some other type of insurance will step in and be the hero and rescue them from these situations. CHECK IT OUT!! 99.99% of the time, these beliefs are wrong. You would hate to find that out in the midst of this type of situation. The chances of some other type of insurance stepping in at this point are pretty much non-existent. The option of ignoring it could lead to a lawsuit against you by the passenger. If judgement is brought against you, your ASSETS (house, car, cycle, business, retirement plans, bank accounts, future earnings) could all be lost or garnished. (As with all issues dealing with interpretation of legal matters, please consult an attorney.) Bottom line....our cyclist insured himself against the two most replaceable items.....the property (guard rail and sign post) and the cycle with the accessories. A loss on any cycle is always capable of being "capped." In other words, the worst that can be lost is the cost of the cycle. That is not the case with passengers. The cost can, and does at times, become astronomically expensive. And that is the item that our cyclist purchased the least amount of coverage on. Higher limits of liability are available on most insurance programs. These limits can be raised to $100,000 per person, $300,000 per accident, with $25,000 property damage. That first number $100,000 is the important one. That is the one our cyclists truly needed. It would have cost him somewhere around $50 more per year! HOWEVER....BE AWARE!! Insurance companies know that their largest single risk is injury to passengers. Because of that, there are agents that MISLEAD you on the true limits of liability being offered. There are companies out there that even though they are offering $100,000/$300,000 liability, THE PASSENGER IS EXCLUDED!! Always ask you agent, or insurance company, if the coverage also includes passengers. If it doesn't, you will be in the same boat as the above cyclist. It has been said many times, but it is always worth repeating....The smart buyer is the educated buyer!!

Information in this article is probably correct as of the date it was written. Please check with your insurance agent or call Mike at 800-729-2537 before you make any life changing decisions based on what you read here. Comments are always welcome.