What to do about damages

This section will help you decide what to do about the damage if you have had a car accident. Your options depend on matters such as the kind of insurance the parties have, the damage done to each party in the accident, who was at fault, and the legal costs of a court case.

Introduction

If your property is damaged in a motor vehicle accident, you must decide whether to make a claim through your insurer, or to sue the other person involved in the accident for damages, or to “forget about it” and 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.

Deciding what to do about damages if you have comprehensive insurance

In deciding what to do, consider the following factors (explored in more detail below):

1 How much is your excess?

2 How much is your no-claim discount?

3 Is the other person insured? Are they able to pay?

4 How much will legal costs be?

5 Whose fault was the accident?

6 How much are your damages?

7 How much are the other person’s damages?

How much is your excess?

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 then pays the difference between the excess and the amount of the expenses (e.g. if your excess is $500 and the cost of your repairs is $750, then your insurance company will only pay $250). Figures vary between companies, but the normal excess is $500. If you are under 25, your insurance policy will probably also include an additional “age excess” (e.g. $400).

Often, making a claim can result in your excess or premium (the cost of the insurance policy) increasing when your policy is due for renewal – make sure you ask your insurance company about this before making a claim.


NOTE

Before making a claim with your insurance company, compare the amount of your excess with the amount of the expenses relating to the accident (e.g. the repairs). It may be cheaper to not make a claim with your insurer.


It is possible to pay a higher insurance premium to reduce or remove the excess. 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.

How much is your no-claim discount?

When you first take out comprehensive insurance, you start off paying 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”.

Each insurance company has different premiums and a different ratings system. The following table gives an example of how ratings affect premiums.

Rating

Premium

1

$400

2

$480

3

$590

4

$740  (basic rate)

5

$920

6

$980

Some insurance companies will still give you a no-claim discount even though you have made a claim, if the accident was not your fault and the insurance company can recover the damages from the other person. Also, some insurance companies, if they do recover damages, will refund part or all of your excess. Some companies allow you to pay a higher premium to protect your no-claim bonus, in the event you have an accident that is your fault.


NOTE

Before making a claim, ask your insurance company what the difference will be in the cost of next year’s insurance if you do make a claim.


Is the other person able to pay?

If the other person has no insurance, you need to find out whether they could pay, if you sued successfully. It is pointless to spend money on legal costs, only to discover that the other person has disappeared or just cannot afford to pay. The old saying is, “you can’t get blood from a stone”.

How much will legal costs be?

Legal costs are relevant if you decide to sue the other driver for damages. The costs vary according to how much the claim is – they increase substantially as the amount of the claim increases.

Claims under $10,000 are regarded as small claims. They are dealt with by an informal procedure known as arbitration, where there is a limit on the legal costs that the losing party can be obliged to pay. If you employ a lawyer, you will be responsible for legal costs that exceed the amount ordered to be paid by the other party. Also, be aware that if you lose, you will be responsible for your property damage and legal costs and also those of the other party.

Seek free legal advice from a community legal centre before starting legal proceedings (for contact details, see Legal services that can help). In particular, the Monash Oakleigh Legal Service offers a free “Motor Vehicle Accidents” pamphlet.

Whose fault was the accident?

In some cases (e.g. if your car was hit when parked) it is easy to show that you are entirely blameless. However, in most cases both parties are to blame. A court can decide to apportion blame (e.g. each party is 50% to blame, or one party is 70% to blame and the other 30%, etc.). Intersection collisions are very common, and on most occasions lead to a sharing of the blame. In deciding whether to sue or whether to settle out of court, you should estimate how the court might apportion blame.

Effect of sharing blame

For example, imagine that you and another drive collide, and both cars need repairs costing $3,000 each. You sue the other driver for $3,000 and the other driver counter-sues you for the same amount. Assuming the case goes to court, your recoverable legal costs would be about $1,200.

1 If you win 100% you will be awarded $3,000 damages and $1,200 costs. Assuming your solicitor charges you $1,500, you will be left with a net amount of $2,700.

2 If the magistrate finds that you are 20% at fault and the other driver 80% at fault, you recover 80% of your claim ($2,400) and costs ($1,200), giving a total of $3,600. The other driver will recover 20% of their claim ($600) and costs ($1,200), giving a total of $1,800.

When the amount the other driver has recovered is set off against the amount that you recover, less your own lawyer’s costs, you are left with only $300, and you still have to pay for the repairs to your car.

How much are your damages?

Before you decide whether or not to make a claim through your insurance company, you must 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.

How much are the other person’s damages?

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. For example, say that the cost of repairing your vehicle is $800, and cost of repairing the other person’s vehicle is $3,000. If a magistrate finds that the other person is 80% to blame for the crash and you are 20% to blame, the result would be as follows:

80% of your claim:

$640

Your legal costs:

$1,200

Total:

$1,840

20% of other driver’s claim:

$600

Other driver’s legal costs:

$1,200

Total:

$1,800

Net payment to you:

$40

In these circumstances, it is more cost effective to make a claim through your insurance company.

Deciding what to do about damages if you have third-party property insurance

If you have third-party property insurance and you’re wondering what to do about damages, you should consider the seven points listed above (under “Deciding what to do about damages if you have comprehensive insurance”), with the exception of point 2 (“How much is your no-claim discount?”). This kind of discount does not generally apply to third-party property insurance, although you may wish to check this with your insurance company.

The main difference between your third-party property insurance and comprehensive insurance is that you are only partly insured. 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 the other driver, because often an insurance company will not pay your legal costs if they regard your case to be hopeless. That is, they will agree to pay for the damage to the other driver’s car, but if you then sue to recover the cost of repairing your car, this legal action will be at your own risk. If you are unsuccessful, not only will you not recover the cost of the repairs, but you will also be left to pay your own and the other driver’s legal costs. In all such cases, notify your insurer in writing and find out their attitude before commencing legal proceedings.

Quite often, if there is a large claim against you, your insurance company will encourage you to claim your damages against the other driver, as it helps the insurance company in the presentation of their case. This is good for you, because in such cases you can “piggyback” on the insurance company’s claim and any money recovered in your counter-claim will be awarded to you.

Deciding what to do about damages if you are uninsured

If you are uninsured, you have two choices:

1 you can sue the other driver (including settling out of court, seeSettling out of court”), or

2 you can pay the cost of repairing your car yourself.

In deciding what to do, you should base your decision on 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, it is advisable to take action as soon as possible.

Deciding what to do about damages if the other driver is uninsured

In certain situations, third-party property insurance provides the same benefits 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.