by pokey » Thu May 17, 2012 04:13 am
My daughter was in a car accident a year and a half ago. At the time, we contacted our insurance agent but, because we had no collision or comprensive on the car that we had no loss. They said that the other party or their insurance company would file a claim if they felt that they had a loss. That was the last we heard of it until last week when we got a collections letter from a collections attorney seeking damages. We immediately referred the matter to our insurance company. When I checked the claim online, there are medical charges that are currently well within the range of our liablity.
My daughter was going straight and the other guy was turning left. He received the ticket for not yeilding the right of way to her, but there was an eyewitness that said she ran a red light (she is not sure of that, it may have turned while she was entering the intersection).
But the way this is being handled by the other insurance company has me spooked. First, they say that they filed a claim, but my insurance company has no record of that. They say that they asked for arbitration, but my insurance company has no record of that, either. They did not try to contact us, but sent a collections letter that we only have thirty days to respond to. If it goes into arbitration, it will take longer than that. If we do not respond within thirty days, it is an admission that the debt is ours. Does that mean we admit fault?
So now, I have a couple of questions. First of all, do I need to respond to the collections letter by referring them back to the insurance company? Second, what happens if my daughter is found to be at fault and the damages/injuries outstrip our liability coverage? Are we then held liable for the overage?
My daughter was going straight and the other guy was turning left. He received the ticket for not yeilding the right of way to her, but there was an eyewitness that said she ran a red light (she is not sure of that, it may have turned while she was entering the intersection).
But the way this is being handled by the other insurance company has me spooked. First, they say that they filed a claim, but my insurance company has no record of that. They say that they asked for arbitration, but my insurance company has no record of that, either. They did not try to contact us, but sent a collections letter that we only have thirty days to respond to. If it goes into arbitration, it will take longer than that. If we do not respond within thirty days, it is an admission that the debt is ours. Does that mean we admit fault?
So now, I have a couple of questions. First of all, do I need to respond to the collections letter by referring them back to the insurance company? Second, what happens if my daughter is found to be at fault and the damages/injuries outstrip our liability coverage? Are we then held liable for the overage?
Posted: Thu May 17, 2012 11:15 am Post Subject:
First, you should write a Fair Debt Collections Practices Act (FDCPA) letter that states: (1) you have no knowledge of the debt alleged, (2) that the debt alleged is not mine, and (3) that the debt collector is to cease all oral and written communications with you, except to notify you that they have ceased their collection activity, and (4) you will pursue civil action against the debt collector under the Fair Credit Reporting Act and/or Fair Debt Collections Practices Act if they post any derogatory information in your credit file or fail to heed your demand to cease collection activity.
You should not mention anything about your insurance company, as the collections agency is most likely NOT the owner of the debt, and has no authority to sue you. You have insurance, the other party was represented by an insurance company, and if nothing else, someone should be suing you for their loss if your insurance company denied their claim. This should not be a collections action.
You need to send a copy of the collections letter and your response to your insurance company and demand a defense to the claim. You need to file a complaint with your state's Dept of Insurance against the opposing party's insurance company alleging violations of the state's Unfair Claims Practices Act.
Now, concerning your other question concerning a claim that exceeds your limit of liability, if found to be at fault. Ordinarily, the insurance company will attempt to settle your claim for the policy limits. When the claim settles in that manner, the other party accepts the settlement as payment in full.
If the claim cannot be settled for the policy limits and goes to court instead, your insurance company must provide you with a defense, and the cost of that is over and above your policy limits. If any amount of the total loss exceeds the policy's limit of liability, then that amount becomes your personal responsibility.
The exception to this is when your insurance company could have and should have settled your claim for its policy limits, but acted in bad faith instead and refused to settle, exposing you to the risk of greater loss. Case law has held insurance companies responsible for the entire amount of an award in such situations.
For the time being, relax and keep breathing. Follow the steps outlined above and wait to see what happens.
Posted: Fri May 18, 2012 06:37 pm Post Subject:
Well said... Don't worry too much but do try your best to resolve the issue
Posted: Sat May 19, 2012 01:57 am Post Subject:
I think that some of the advice above might be well intentioned by slightly incorrect. It sounds like the insurance carier for the other vehicle is seeking to recover from you damages for property or medical expenses. This process is called subrogation. Only a few states recognize subrogation claims as subject to the Federal Fair Debt Collection Practices Act ("FDCPA"). Therefore, you will have very little recourse in preventing subrogation attempts by resorting to the protections within the FDCPA. Essentially, the other insurance carrier is within its rights to try to recover its losses from you and may even hire third parties to pursue those collections.
With respect to the collections letter, do not reply to it until after you have consulted with your insurance carrier or with an attorney. If your insurance carrier is not providing you with an attorney, you can contact the local bar association in your county or state and ask if they have a list of attorneys who may be willing to work for reduced rates or even for free. The collection letter itself sounds somewhat unusual. To my knowledge, no state recognizes the failure to respond to a demand letter as an admission of liability. That being said, there are some legal procedures that do indeed consider a failure to respond as an admission of liability. For example, a civil action complaint, a discovery request, or an arbitration notice will al typ;ically impose penalties upon you for failing to respond. Be sure that the collections letter isnt one of those types of documents.
You should be aware that the other insurance carrier quite possibly will file a lawuit against you and or your daughter. It is imperitaive that you find out from your insurance carrier whether they will handle this matter for you
Posted: Sat May 19, 2012 10:11 am Post Subject:
In my view, firstly if you would not reply to the letter that you got then it may be possible that the officials may assume that you have admitted your fault. One thing can be done that you also can notify that you were not aware of how and when did this debt alleged and all happened. Consult your insurance company regarding this thing and meet a perfectionist of the vehicle insurance who would help you in this thing.
Posted: Tue May 22, 2012 01:02 am Post Subject:
Only a few states recognize subrogation claims as subject to the Federal Fair Debt Collection Practices Act ("FDCPA")
While that may be correct, subrogation is NOT PERFORMED by collection agencies. It is a function of the insurance company only. If the insurance company has remitted the debt for collection, it has ceased its efforts to subrogate, and that IS A MATTER governed under the FDCPA.
The OP has said that his insurance company was involved from the beginning, so something is wrong here. Insurance companies work behind the scenes to deal with these kinds of claims, and insureds rarely become involved like this.
That's why I strongly recommend sending the FDCPA letter -- just to preserve any rights that would be lost by not responding -- and ALSO filing a complaint with the State's Dept of Insurance alleging unfair claims practices. Get the state involved and things often have a way of quickly being resolved.
And, yes, if the other party's insurance company chooses to sue for subrogation, as it may, then the OP's insurance company owes him a defense.
Posted: Tue May 22, 2012 03:22 am Post Subject: Thank you!
Thank you for a speedy reply to my question.
I would really rather not be involved at this level. I have had to deal with insurance in the past (not auto) and never had a problem. This has been a real trip. The events in this mess lead me to wonder if I am dealing with people who are either incompetent or dishonest.
First, the other company says that they tried to file subrogation with my insurance company over a year ago. They allege that my insurance company refused to file because "no such file exists". Then the other insurer tried to file for arbitration and my insurance carrier refused because "insured is not cooperative" So they sent the matter to collections.
My insurance carrier initially denied that any attempt at contact had been made. But now they say that the other insurer used an incorrect policy number to file and then that they tried to file on a car that we no longer own that is of the same make. Right.
I did not initially respond to the collections letter but referred the matter to my insurance company immediately. They filed a claim and contacted the other insurance company to respond to the subrogation. After reading the letter again, I realized that it stated that if I did not respond, in writing, within 30 days, that it would be assumed that I considered the debt to be valid.
I contacted an accident attorney and he suggested that we do need to give a written response and to include my insurance carrier's name and phone number, along with the claim number. I talked to my claims representative, and they said that it was unnecessary to do so because the matter was in subrogation, that if an agreement could not be reached, that it would go into arbitration and that the arbitration would be binding. They said that the collections letter became "Null and void" as soon as the claim was filed because it became apparent that I had insurance after all.
I still want to write the FDCPA letter. Either that, or get a "null and void" statement in writing from the collection agency. I feel that to not do so leaves the door open to a collection action on a debt that is not valid. I was just wondering what would happen if I did so. Would that interfere with the subrogation process?
As an aside, in the accident, the other person received the ticket because they turned left in front of my daughter at a controlled intersection. In question is the matter of light color. It changed at approximately the time she entered the intersection. I guess in Colorado, the person turning left is presumed to be at fault so I am not even sure the guy has a case. Still, I am looking at getting my own attorney because of the weird way that it has been handled. I am definitely going to file a complaint with the State Department of Insurance.
Posted: Tue May 22, 2012 04:10 am Post Subject:
First, the other company says that they tried to file subrogation with my insurance company over a year ago. They allege that my insurance company refused to file because "no such file exists". Then the other insurer tried to file for arbitration and my insurance carrier refused because "insured is not cooperative" So they sent the matter to collections.
My insurance carrier initially denied that any attempt at contact had been made. But now they say that the other insurer used an incorrect policy number to file and then that they tried to file on a car that we no longer own that is of the same make. Right.
If this is true, and collections is successful in recovering directly from you, you have the basis of an insurance bad faith action against your insurance company. That could be worth thousands of dollars to you/your daughter.
Still, I am looking at getting my own attorney because of the weird way that it has been handled. I am definitely going to file a complaint with the State Department of Insurance.
Before you get involved with an attorney -- don't misunderstand, you will need one for a bad faith litigation -- make your complaint to the Dept of Insurance. It needs to be against BOTH insurance companies, and the DOI will sort out which one (or both) has handled this incorrectly. But they cannot get involved once you have legal representation.
I still want to write the FDCPA letter. Either that, or get a "null and void" statement in writing from the collection agency. I feel that to not do so leaves the door open to a collection action on a debt that is not valid. I was just wondering what would happen if I did so. Would that interfere with the subrogation process?
Based on your newly supplied information, the subrogation process is over. You need to protect yourself from the harm a collection agency can do to you even if it doesn't have true authority to do so. The FDCPA Cease and Desist letter is Step 1.
I talked to my claims representative, and they said that it was unnecessary to do so because the matter was in subrogation, that if an agreement could not be reached, that it would go into arbitration and that the arbitration would be binding.
While the process described by your "claims representative" is the one that is supposed to happen, but if your insurance company did not "play the game" properly, the claims rep you spoke to might not be aware of the actual situation. Here's my impression of what happened:
The insurance company paid for the damages to its insured's vehicle and attempted to come after you through your insurance company. If they had the wrong policy number, well, that could certainly complicate things. If you were uncooperative (I have no reason to believe you were), that would have complicated things.
[Only your insurance company and the other party's insurance company know the truth behind the situation as it now exists.]
So the only recourse the other insurance company has is to (1) attempt collections using a third party collection agency or (2) sue you in civil court. As far as they are concerned, subrogation is over unless your insurance company wants to come to the table, and it doesn't sound like they do, based on what you've stated.
If you send the FDCPA "Cease and Desist" (not "null and void") letter -- search the Internet or pm/email me for an example -- the collection agency MUST stop communicating with you except to tell you that it has stopped its collection activity (they won't tell you that, you just won't hear from them again) or to inform you that they are taking further legal action (which they probably are not capable of doing, because they most likely don't "own" the debt, which is a legal requirement for a civil suit).
But . . . in response to your Cease and Desist letter, the insurance company will likely send your matter to an attorney for litigation. At that point, once you have been sued, your insurance company MUST provide you with a defense. If they fail to do that, you have a HUGE lawsuit against them, not only for the limit of your policy owed to a prevailing party against you, but the full amount of any award against you, PLUS additional damages to you for breach of contract in its failure to defend you.
Posted: Tue May 22, 2012 04:48 am Post Subject:
Interestingly, Colordao happens to be one of those few states that does characterize subrogation recovery efforts as debt collection. Although not subject to the Federal Fair Debt Collection Practices Act, the Colorado Attorney General's office considers subrogation claims to be subject to the Colorado Fair Debt Collection Practices Act. See the following link:
www.coloradoattorneygeneral.gov/sites/default/files/uploads/cab/subrogationopin7142004.pdf . (the problem was the period-MH)
Note, it is my understanding that this opinion letter is being challenged
http://www.coloradoattorneygeneral.gov/sites/default/files/uploads/cab/subrogationopin7142004.pdf
[Link replaced and tested by Moderator MaxHerr]
Posted: Tue May 22, 2012 04:55 am Post Subject: The link above
Sorry, not sure why that link is not working. I just searched the Colordao AG opinions and it seems to have been taken down from their website. Perhaps they have changed their mind about subrogation being debt collection. Anyway, you can find the advisory opinion by googling the following phrase" colorado subrogation fair debt collection"
Posted: Tue May 22, 2012 11:59 am Post Subject:
I fixed the link (a period at the end of the sentence was the culprit).
Thanks CrawfordLawFirm for the information. Interestingly, it appears that the reasoning of the Administrator of the Collection Agency Board in classifying insurance subrogation as "collections" is to protect consumers by requiring debt collectors to adhere to the CFDCPA, and, in part, by being registered with the state.
Apparently, under CO law, the "Advisory Opinion" maintains that subrogation itself has, since 2004, been held to be "collections", which means that when attempting to deal directly with consumers, insurance companies are governed under the CFDCPA, and must follow that law. Thus, certain notices to consumers are required, and consumers must respond appropriately in order to preserve their rights. If the insurance company uses a collection agency to directly attempt its subrogation efforts, the collection agency must comply with CFDPA.
Under FDCPA, subrogation case law holds that a tort is not a "debt". A traffic collision is a tort offense. That the FDCPA does not apply to subrogation does not mean that debt collectors can skirt the law and do all those nefarious things for which collections people are well known. It only means that insurance companies are not engaging in "debt collections" when they subrogate a claim. Colorado debt collectors must have been abusing insurance consumers in their efforts to collect subrogation claims for insurance companies.
There are conflicting federal Circuit Court opinions on the application of FDCPA to subrogation claims, and eventually the US Supreme Court may have to decide whether they are debts or not.
I stand by my repeated recommendations to the OP, above, that the Cease and Desist letter be sent within the 30 day time limit. It cannot hurt, except to propel the matter into litigation. As an "insured" respondent, the OP is entitled to a defense from his insurance company, even if it believes the claim has no merit -- they cannot refuse to defend a covered loss. Insurance companies that do refuse typically find themselves on the losing end of even more expensive litigation and judgments. Uninsured persons may be on a somewhat different footing.
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