Can You Protect Yourself from California's Outdated Financial Responsibility Law?

Barry P. Goldberg represents insured accident victims on a regular basis. Many of these insured clients honestly believe that they have "full coverage" and are adequately protected if they are involved in an accident. Most clients are disappointed to learn that they either have inadequate coverage or that the at–fault driver is woefully underinsured. How can this happen in a state where automobile liability insurance is mandatory?

The problem begins with California's Compulsory Financial Responsibility Law (California Insurance Code §16056). The law requires every driver and owner of a motor vehicle to be "financially responsible" for their actions. In order to be considered "financially responsible" a driver need only maintain the statutory minimum liability limits. In California, the minimum required limits are for Bodily Injury: $15,000 for death or injury of any one person, any one accident, and $30,000 for all persons in any one accident. For Property Damage: $5,000 for any one accident. Ownership liability follows form. (See, California Vehicle Code § 17151) That section and those limits were enacted in 1974.

Let me put that in perspective for you. Richard Nixon was president. The average house cost $10,990 and the average income was $13,900 per year. A gallon of gas was 55 cents. Also at that time, the average price of a new car was $3,750.00 and medical costs were a fraction of what they are today. Back in 1974, California motorists were relatively well-protected by the state required minimum limits. It is nothing less than shocking that the statutory minimums have not been adjusted for 40 years!

Needless to say, today the statutory minimums are grossly inadequate and California motorists who opt for the minimum are poorly protected and, more significantly, those hit by a minimum liability driver will receive inadequate compensation. Today, replacing a bumper cost almost $5,000 and a visit to an emergency room followed by tests and treatment will eclipse that number. Almost any accident involving more than one other vehicle will exhaust the property damage limits. Further, almost any significant accident in which more than one not at fault person claims bodily injury is likely to exhaust the bodily injury limits.

Recently, I asked a testifying Economic Expert to give me a rough idea what the California Minimums would be today, if adjusted by the cost of living increases reflected in the Consumer Price Indexes. No surprise, instead of $15,000/$30,000 and $5,000---It should be $52,500/$105,000 and $17,500! With proper minimum limits---it would nearly eliminate the need for Uninsured Motorist Coverage for probably 98% of all accidents!!!

Given the state of the economy, the resolve to raise the statutory minimums (and the commensurate costs) are simply not present despite the lack of an adjustment in 40 years. The uninsured rate of drivers in California is purported to exceed 20%. In lower economic neighborhoods, the uninsured figure is reported to be as high as 80%. More importantly, illegal, unlicensed and uninsured drivers currently exceed 1,000,000 in this state. Accordingly, uninsured and underinsured motorist coverage is more important than ever. High limits should be required.

The only way to protect yourself and your family from California's outdated Compulsory Financial Responsibility Law (with inadequate protection as calculated in 1974) is to purchase sufficient Uninsured Motorist coverage. (See How Much Uninsured Motorist Insurance Should I Buy?) This important insurance component of your policy will fill the "gap" created by the outdated minimum limits. As long as the rest of California, automobile insurance companies and the legislature are living in 1974, it is essential for a "financially responsible" driver and family to live in 2014 and beyond. It is "financially responsible" to consider the higher costs of automobile repairs, the higher costs of medical care and the higher costs to be out of work as a result of an automobile accident.

Barry P. Goldberg always recommends that his clients, friends, family and neighbors maintain Uninsured Motorist limits equal to their liability limits. At the very minimum in all instances, $30,000/$60,000 is required. Because Uninsured Motorist Coverage remains a comparative bargain, you can easily protect yourself against California's outdated Financial Responsibility Law.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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