From Gregory Boop,
Your Guide to Business Insurance.
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Contact with the Injured Party - Negotiation

Your insurer will make contact with the injured party. Employees should not speak with the injured party, relatives or representatives. Politely refer any calls or letters regarding the accident to your insurer or the attorney assigned.

Most auto accidents and liability claims involve a claim of negligence on the part of your employee and your company is held liable through a legal doctrine called "respondeat superior." Negligence claims have a time limit in which to be filed as lawsuits - each state has its own statute of limitations. Your insurer will request medical bills, lost wages, and other information from the injured party and attempt to negotiate a settlement before a lawsuit is filed. In most instances, the insurance company can settle the claim without your permission if it will eliminate a lawsuit and further expenses. Owners are often very surprised to find that they have very little input at this stage. A good insurance professional will keep you up to date, but you will not have much control over the process at this point.

It takes time for a full evaluation of a claim to be made. Under the law, damages in a negligence case include medical damages, pain and suffering, lost time at work, allowance for permanent injuries, property damage and the claims of spouses. In some states, no fault rules apply and damages are limited. The insurer has a number of tools at its disposal to evaluate damages and to negotiate the claim.

Lawsuit

If the claim cannot be settled, the injured party may file a lawsuit against your business. The injured party will be known as the plaintiff and will file a complaint with the appropriate court claiming negligence and damages. The complaint will name your company and the employee. Your business and the employee will be defendants and your assigned insurance counsel will defend the business and employee.

All states have different procedures and laws, but a lawsuit generally follows the same form in every state:

1. Pleadings. A complaint is filed and your attorney will file an answer to the complaint.
2. Scheduling and Discovery.The court will hold an initial conference and set a schedule for the rest of the case. Both sides will also engage in discovery. This is asking written questions, requesting documents and medical bills and appearing to give testimony at depositions. It is your obligation under the policy to cooperate fully with your attorney and insurer during all phases of the lawsuit and this part will be the most time consuming.
3. Motions. Each side may file motions to prove or dismiss certain aspects of the case. For example, since liability is not an issue (the employee ran a red light) the plaintiff may file a motion to have the court rule that liability is established an the trial is only on the issue of damages.
4. Final Conference and Attempt to Settle. Prior to trial, the court will hold a final conference and see if the matter can be settled.
5. Trial. A trial will be held and a company representative will need to attend.
6. Verdict and Judgment. The court or jury will decide liability and award damages and the court will convert that verdict into a judgment - the amount your company is liable for.

Judgment

After the trial, the verdict is converted to a judgment. A judgment is a legal document giving the plaintiff the righ to recover a specific sum of money from your company. If you do not have any insurance, the plaintiff is entitled to seize and sell equipment vehicles, buildings and to levy accounts receivable to satisfy the judgment.

Your insurer is obligated to pay the judgment if it is covered under the policy up to the policy limits. By doing so, the insurer will satisfy the judgment and the judgment will be marked as satisfied. If the judgment exceeds policy limits, the business will still have a judgment against it for the remainder after the insurer tenders limits.

Aftermath

Your business insurance premiums are based on industry history and your company's claims history. Large claims in you history have a significant affect on your premiums. Premiums will increase. In some cases, the insurer may choose not to renew your business insurance.