No Fault Party at Fault Says Angry Emailer
Q. I got into a car accident where I was at fault. The damage to the other guy’s car was $2,000. He and I agreed to settle for $2,000 without reporting to insurance, but after I paid him the money he went and reported it anyway. Now my insurance premiums have gone up. Can I get my $2,000 back and sue him for my increased premiums?
Your predicament, believe it or not, is common. While I am not advocating failing to report accidents to insurers, the fact of the matter is that often parties enter into these “cash” agreements to avoid the bureaucracy and hassle of dealing with insurance companies. In fact, I even once heard a Small Claims Court deputy judge remark that this is “common practice”. Accordingly, my response leaves aside the legalities or lack thereof of not reporting to an insurance company. Also, because of this remark made by a deputy judge, I believe that the Small Claims Court may be just as unwilling to disregard such legalities, though it is possible that a judge would make a finding that your claim is ill-founded from the start.
The first question I would ask is whether or not you entered into a signed contract with the other driver, even if handwritten and informal. If you did, then that will better serve as evidence of the arrangement you had. I assume, however, as you have not referenced anything to this effect, that no such written evidence exists.
Let’s look at the $2,000. I will assume that this amount was arrived at after the other driver provided you with a written quote evidencing what it would cost to repair his vehicle. Now, on the one hand, the driver’s vehicle was damaged by you and he was entitled to be reimbursed for the cost of the repairs. One the other, your agreement with him, even if verbal, was premised on him not reporting this to the insurance company, and perhaps you can argue that this was a fundamental breach of the agreement.
In my view, you have a chance at succeeding on a claim for a return of the $2,000. Had you known that the other driver was going to report this dispute to the insurance company, you would not have entered into this agreement. Because your premiums have risen, you can argue that you reasonably relied on his representations to your detriment. Hence, misrepresentation by the other driver as well as arguably breach of contract.
Turning to the insurance premiums, this is also not clear cut. On the one hand, it was you who caused the accident. Further, the other driver can argue that he had no idea how this would affect your insurance premiums. On the other, the matter would have never come to light of your insurer had the other driver stuck to the bargain.
I believe you can make a reasonable claim for the reimbursement of your increased insurance premiums as well. Even if you never explicitly referenced the insurance premiums as a reason for making the cash payment, it is implicit that the purpose of entering into such an arrangement is to avoid the insurance complications.
Of course, the foregoing depends on your ability to prove to the court that you had such an agreement with the other driver, that you actually paid the $2,000 cash and that your premiums have indeed risen as a result of him reporting the accident. Without a written agreement this may be easier said than done.
So, to all the readers of Small Talk, what can we learn from this?
1) Get it in writing! With a written agreement, no matter how informal, our above questioner would be in a much better position than he is now, attempting to prove a verbal agreement.
2) Ensure the terms are clear. Our above questioner would be far better off on his claim for misrepresentation or breach of contract with clear terms that have been breached rather than working backwards to prove the terms.
3) Whenever making a cash payment, get the other party to confirm receipt of the cash in writing. Our above questioner may have difficulty proving he actually made the cash payment if denied by the other driver.
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