Introduction to Car Insurance – A Common Misconception

Do you sue the other car driver/owner’s insurance company?

The Misconception

There is a common misconception that when you initiate a law suit for losses and injuries suffered as a result of a car accident that you will be suing the other side’s insurance company.

What Actually Happens

Car accident litigation involves elements of contract law, insurance law, and tort law, and more.

tort law

Tort law is the law concerning civil (that is, non-criminal) wrongdoing that causes harm.

In tort law, an injured person may have a “claim” or “cause of action” against an at-fault driver whose failure to drive reasonably and/or safely causes an accident that injures them.

The injured person would not ordinarily have a “claim” against the at-fault driver/owner’s insurance company directly, because the insurance company did not commit a wrong or “tort” against the injured person. The insurance company did not cause the harm to the injured person.

The at-fault driver is the one who committed the tort and caused the harm to the injured person. Therefore, the at-fault driver is a person who the injured person might sue.

The injured person may also have a “claim” against other people involved in the accident that caused their injuries and losses, depending on the circumstances of their case. These people might include:

  • a vehicle owner or car rental company who allowed the at-fault driver to drive their vehicle;
  • the driver or owner or both of another vehicle who was also involved in the accident;
  • a person, group, corporation, municipality, government, or government entity who created a hazard that contributed to or caused the action;
  • a vehicle manufacturer or repair person or corporation who made the vehicle unsafe in a way that contributed to or caused the accident;
  • and many potential others.

Tort law is complex and determining who to sue is a complex legal decision. A personal injury lawyer will be able to assess the situation and determine who the injured person has a “claim” against and who to sue.

Every set of facts is unique in this regard. However, it is not usually the case that an injured person would have a claim against another driver/owner’s insurance company.

But then, how does the insurance company get involved?

contract and insurance law

A driver or vehicle owner who purchases a policy of car insurance has a contractual relationship with the insurance company. The driver/owner pays premiums, and in exchange, the insurance company agrees to cover or “indemnify” them if they are involved in an accident. This indemnity includes coverage for the expense of injuries and losses that the driver/owner may cause to other people, up to the driver/owner’s applicable policy limits.

So, when an injured party sues an insured person or other entity and they become a Defendant, their insurance company steps in to the shoes of the Defendant, and takes over the action on their behalf in order to fulfill their half of the contract of insurance. This concept is known in insurance law as “subrogation”.

In stepping in to the Defendant’s shoes, the insurance company may act on behalf of their insured and may do things such as:

  • defend against the injured person’s claim;
  • negotiate with the injured party’s lawyer;
  • hire a lawyer to conduct negotiations, questioning/discoveries, or trial of this matter;
  • hire experts and conduct investigations into the accident and the injured party’s injuries and losses;
  • pay a settlement or judgment amount to the injured party in satisfaction of their claim or a judgement in the injured party’s favour;
  • and assume any rights that the Defendant would have at law in this matter and take any actions that the Defendant would be able to take if they were handling this matter themselves.

Note that there may be situations where the insurance company will deny coverage and refuse to indemnify their insured, or where they may later pursue their insured to recover part or all of the money that they paid out to the injured party.

Note that there are also situations where the at-fault party is not insured, and these situations are subject to different considerations.

Insurance law is complex and there are many factors which may complicate the action or change the outcomes.


The information provided on this website does not constitute legal advice and should not be construed as such. Moustarah & Company does not guarantee that this information is accurate or up to date. As a result, should you require legal advice, please contact a lawyer.