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Overview of Automotive Products Liability Law

The everyday operation of millions of cars and trucks on the streets and highways of the United States, and the massive resulting toll in deaths, personal injuries, and property damage caused by motor vehicle accidents, have inevitably created a situation in which the manufacturers and sellers of motor vehicles are implicated as potential defendants in legal actions seeking compensation for the losses arising from such accidents. Products liability law, a subset of the branch of the legal system called tort law, provides the legal standards for determining the potential liability of motor vehicle manufacturers and their dealers in such cases. (The principles of products liability law also apply to non-automotive products, but our discussion here will focus on the law of products liability as it relates to motor vehicles.)

Comprehensive Coverage

Cars and trucks can be damaged in a wide variety of ways and by a wide variety of instrumentalities, both while they are in operation and while they are parked and at rest. Comprehensive coverage under motor vehicle insurance policies has been devised in order to provide owners and operators of vehicles with protection against the risk that such damage to a vehicle will occur.

Automobile Insurance Premiums

Insurance contracts, at their core, are papers that prove a promise by an insurance company to pay benefits under an insurance policy and the payment of money by an insured for that protection. The money paid by the insured is called a premium. The premium is made up of money paid by the insured to the insurance company to cover the insured risk and the administrative costs. Without the payment of a premium, no contract of insurance exists between the insurance company and the insured.

Underinsured/Uninsured Motorists Mandatory Coverage

Requirements for providing or offering underinsured motorist coverage and uninsured motorist coverage are not uniform. In some states, it is mandatory for insurers to provide a specified amount of underinsured motorist and uninsured motorist coverage; the amounts that are specified may coincide with the minimum required liability insurance coverage in the state. In other states, insurers are merely required to make such coverage available to the purchasers of auto insurance policies. In yet other states, the subject of underinsured motorist and uninsured motorist coverage is considered to be a voluntary matter between the insurer and the insured.

Insurers' Obligation to Indemnify

Under an insurance policy, an insurance company has two principal obligations. One of those obligations is the insurance company's duty to indemnify the insured in the event of a claim within the policy's coverage. The insurance company's duty to indemnify is usually triggered when the insured's legal obligation to pay damages is established either through a court judgment or a settlement. The duty to indemnify depends on facts and not speculation. This makes the duty to indemnify narrower in scope than an insurance company's duty to defend an insured.