The mandatory nature of motor vehicle insurance in the United States means that the system under which cars and trucks are insured involves a three-part relationship among the vehicle owner or operator, the insurer, and the government of the state where the car or truck is located. The heart of the auto insurance business relationship, though, is the policy of insurance, a bilateral contract under which the insurer agrees to provide the requested insurance coverage on a vehicle and pay valid claims and the insured agrees that he or she will in return pay the premiums due under the policy. When an insured fails to make timely payment of the premiums or fails to pay them at all, the insurer's ultimate recourse is to cancel the policy for nonpayment of premiums.
While the owners and operators of private motor vehicles sometimes think of their possession of auto insurance as totally eliminating any potential tort liability on their parts, such owners and operators remain subject to the tort system to the extent that their insurance coverage does not encompass part or all of their legal liability for an incident that has caused personal injury or property damage to another person. Such a situation can arise, for example, where a court judgment reflecting injury or damage caused by an insured private vehicle owner or operator exceeds the limits of his or her policy, or where the insured's failure to provide required notice to an insurer or cooperate in the defense of a legal action causes the insurer to assert that it is not required to provide coverage for the loss under the policy.
An automobile insurance policy may have a provision for "other insurance." When more than one insurance policy provides coverage for a loss, the "other insurance" clause can limit an insurance company's liability by defining the priority in which the policy should pay an insured's claim. There are three types of "other insurance" clauses: (1) pro rata; (2) excess; and (3) escape.
A mention of the topic of auto insurance generally brings to mind the myriad policies that cover the individual owners and drivers and individual cars and trucks that operate every day on the streets and highways of the United States. In many cases, though, fleets of greater or lesser numbers of vehicles owned by a single entity and operated by many different individuals are sent out on the roads in order to carry out the business of their owners. The existence of such fleets creates unique issues in the area of motor vehicle insurance.
Age and gender are two of the criteria used by insurers in the process of determining risks in the writing of motor vehicle insurance policies. As a result, auto insurance policies sometimes contain provisions that exclude from coverage incidents that occur while a covered vehicle is being operated by a driver under a specified age, or by a male driver under a specified age. Questions of coverage arise when, as is inevitable, such incidents of operation by underage drivers take place and result in injury or property damage.
