I am being sued for a car accident that took place nearly three years ago. My insurance carrier at that time is now bankrupt. What do I do?

UPDATED: Mar 22, 2009

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

I am being sued for a car accident that took place nearly three years ago. My insurance carrier at that time is now bankrupt. What do I do?

My son borrowed my car approx. 3 years ago, had an accident which he was found at-fault, resulting in the other person’s car being totaled. The other driver did not claim to be injured at the time of the accident. Coincidentally, my car insurance carrier went bankrupt and it took me one year to collect the damages to my car from that carrier. Today, my husband and I received a summons from the other driver saying that he suffered severe injuries and that he suing us for $1,000,000. What responsibility does our, now defunct, insurance company have to pay this guy? Doesn’t the bankruptcy judge who oversees the disbursement of insurance company funds have to have money put aside for claims that came in before the auto insurance company went bankrupt?

Asked on March 22, 2009 under Insurance Law, Missouri


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

Insurance companies that fail are placed into a state operated insolvency proceeding in the state of their incorporation, and an official from that state's insurance department typically takes over the insolvent company as Liquidator and gradually winds up its affairs, pays claims, etc.

In addition, each of the 50 states has a separate life insurance guaranty fund and a property-casualty insurance guaranty fund. The insurance guaranty fund typically provides some measure of protection to the former policyholders of the insolvent company in the local state who were placed in peril by the insolvency of any of the insurance companies who had been licensed in that state. There are limits on the amount of protection provided and requirements as to what one must do to get protection. (The website http://www.insuranceguarantyfunds.com will have more information about state insurance guaranty funds.)

However, once you have been served with process in a lawsuit you must answer the suit within the required time limit or risk a default judgment being taken against you. We suggest that you immediately send a notice of the new claim to the liquidator of the insurance company in its state of domicile and that you also contact your state's insurance department and your state's property casualty insurance guaranty fund and advise them of this claim. Consulting an attorney to represent your interests also may be wise, especially if the guaranty fund protection is limited.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption