What to do when your motor vehicle is damaged
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If your property (e.g. your vehicle) is damaged in a motor vehicle accident, you must decide whether to:
make a claim through your insurer;
sue the other person involved in the accident for damages; or
pay your own costs.
In order to decide which course of action will cost the least amount of money, it is necessary to consider all the alternatives. There are different considerations depending on whether you have comprehensive insurance, third-party insurance, or if you are uninsured.
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In deciding what to do about damage to your vehicle if you have comprehensive insurance, consider the following factors (explored in more detail below):
how much is your excess?
how much is your no-claim discount?
can the other person pay?
how much will legal costs be?
whose fault was the accident?
how much will it cost to repair your vehicle?
how much will it cost to repair the other person’s vehicle?
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In an insurance policy, the ‘excess’ is the amount you (the insured) must pay when you make a claim and before an insurer will pay for any expenses.
The insurer pays the difference between the excess and the amount of the expenses (e.g. if your excess is $500 and it will cost $750 to repair your vehicle, your insurance company will pay $250).
Figures vary between insurers, but a normal excess is between $400 and $2000. It is possible to reduce the excess, or to remove it altogether, by paying a higher insurance premium. For example, you could pay a premium of $1100 and have no excess, or pay a premium of $800 and have an excess of $600. If you are under 25, your insurance policy will probably also include an additional ‘age excess’.
Often, making a claim can result in your excess or premium increasing when your policy is due for renewal – make sure you ask your insurance company about this before making a claim.
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When you first take out comprehensive insurance, you pay a basic rate premium. If you don’t make a claim for a year, then in the following year you receive a discount, in that you move to a lower rating and therefore pay less for the same insurance. If you have made a claim, then in the following year you move to a higher rating and pay more for the same insurance. The no-claim discount is often called a ‘no-claim bonus’.
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If the other driver has no insurance, consider whether they will be able to pay if you successfully sue them. It is pointless to pay legal costs only to discover that the other person does not have money to pay you. You should be aware that it can be difficult to recover money owed to you even if you get a court order in your favour, especially if the defendant has no recoverable assets or income.
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Legal costs are relevant if you decide to sue the other driver. The costs vary according to how much you are claiming the other driver owes you – the higher the claim, the higher the legal costs.
Claims under $10 000 are classified as small claims. They are dealt with by an informal process known as arbitration, where there is a limit on the legal costs the losing party can be ordered to pay. If you hire a lawyer and you win, you will be responsible for your legal fees that exceed the amount ordered to be paid by the other party. Also, be aware that if you lose, you will be responsible for paying your legal costs and the legal costs of the other party, and the cost of fixing the damaged vehicle. Before starting proceedings to sue another driver, seek free legal advice from a community legal centre (see Chapter 2.3: Legal services that can help).
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In some cases (e.g. if your vehicle was hit when legally parked), it is easy to show that you are entirely blameless. However, in many cases, both parties are to blame for an accident occurring. A court can decide to apportion blame (e.g. each party is 50 per cent to blame). In deciding whether to sue the other driver or whether to settle out of court, you should estimate how the court might apportion blame.
Effect of sharing the blame
For example, imagine that you and another driver collide; both vehicles need repairs costing $3000 each. You sue the other driver for $3000 and the other driver counter-sues you for the same amount. The case goes to court; your recoverable legal costs are $1200. If you win, and the court finds you are not to blame at all, you will be awarded $3000 damages and $1200 costs. Your solicitor charges you $1500, so you will receive $2700. If the magistrate finds that you are 20 per cent at fault and the other driver 80 per cent at fault, you will receive 80 per cent of your claim ($2400), plus legal costs ($1200) – so you will receive $3600. The other driver will receive 20 per cent of their claim ($600), plus legal costs ($1200) – so they will receive $1800. When the amount the other driver receives is set off against the amount that you receive, less your own lawyer’s costs, you are left with only $300, and you still have to pay for your vehicle to be repaired.
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Before you decide whether or not to make a claim through your insurance company, you should compare the cost of repairing your vehicle to the amount of your excess, plus the higher premium that you are likely to pay the following year.
Also, before you decide to sue the other driver (without making a claim through your insurer), you should compare the cost of repairing your vehicle to the cost of taking the other driver to court.
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If the cost to repair the other driver’s vehicle is substantially more than the cost of repairing your vehicle, it is not cost effective to seek to recover your repair cost from the other driver. This is because, if you are found even slightly to blame for the accident, your share of the other driver’s repair costs may exceed the amount that the other driver is ordered to pay you. In these circumstances, it is more cost effective to make a claim through your insurance company.
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If you have third-party property insurance and you are wondering what to do about your damaged vehicle, you should consider the seven bullet points listed above (under ‘What to do when you have comprehensive insurance’), except for ‘How much is your no-claim discount?’ as this kind of discount does not generally apply to third-party property insurance, although you can check this with your insurance company.
The main difference between third-party property insurance and comprehensive insurance is that you are only partly insured with third-party property insurance. Therefore, you can make a claim through your insurance company and also sue the other driver to recover the cost of repairing your vehicle.
Another difference is that, if the matter goes to court, third-party property insurance covers you for the amount that a magistrate awards against you (e.g. if a magistrate decides that you need to pay $800 to the other driver, your insurer will pay this cost). Therefore, any amount that you receive from the other driver will not be reduced by the amount that you are ordered to pay them. For example, if the other driver is ordered to pay you $500 and you are ordered to pay them $200, you receive the full $500, as your insurance company pays the $200 owing to the other driver.
However, you must be wary of suing another driver, because often an insurance company will not pay legal costs if they think a case is hopeless. That is, they will pay for the damage to the other driver’s vehicle to be repaired, but if you sue the other driver to recover the cost of repairing your vehicle, the insurance company will not pay your legal costs and this legal action will be at your own risk.
If you are unsuccessful in court, not only will you not recover the cost of the repairs to your vehicle, but you will also be left to pay your own and the other driver’s legal costs. In all such cases, before commencing legal proceedings, first notify your insurer in writing and find out what they think of you suing the other driver.
Often, if there is a large claim against you, your insurance company will encourage you to claim your damages against the other driver. This is good for you, because you can ‘piggyback’ on the insurance company’s claim and any money recovered in your counter-claim will be awarded to you.
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If you are uninsured, you have two choices:
you can sue the other driver (including settling out of court, see ‘Settling out of court’, below); or
you can pay the cost of repairing your vehicle yourself.
In deciding what to do, you should consider the other driver’s financial position, legal costs, whose fault the accident was, and the amount of damage to each vehicle (all these issues have been discussed above).
If, after considering these matters, you wish to sue the other driver, it is advisable to act as soon as possible.
Note that you must sue the other driver for property damage within six years from the date of the accident.
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In certain situations, third-party property insurance provides the same cover as comprehensive insurance. For example, provided that the other driver was at fault, can be identified and was uninsured, third-party property insurance will cover the cost of the repairs to the insured person’s vehicle, although only to a capped amount.
What to do when your motor vehicle is damaged
Chapter: 10.5: Motor vehicle accidents and insurance
Contributor: Adrian Snodgrass, Principal Lawyer, ASA Law
Current as of: 1 September 2024
Law Handbook Page: 869
Next Section: Damages, claims and court
