What would happen if an insurance company goes bankrupt? Specifically, say a small business has liability insurance from a company and that business gets sued and files a claim, but the insurance company is in bankruptcy and cannot pay. Does the business need to pay itself, or will the judgment be discharged?
2007-11-05 14:48:42 · 5 answers · asked by Anonymous in Politics & Government ➔ Law & Ethics
The lawsuit is against the business - not the insurance company.
The lawsuit would read: Jane Doe vs. XYZ Business. Not Jane Doe vs. Insurance Company.
If the insurance company is bankrupt then the business is held liable for the judgment.
As such, make sure you get a policy with a reputable insurance company with a strong rating from AM Best.
2007-11-05 14:54:54 · answer #1 · answered by Boots 7 · 0⤊ 0⤋
In general banks and insurance companies are bailed out in some fashion before going bankrupt. Take a look at Bear Sterns. Sure there have been some insurance companies that have had financial problems and been liquidated. If they are larger, then they are forced to sell to a another company. If they are smaller, the state insurance regulators would take over, cancel policies as they expire and pay out claims. Just letting the company liquidate. As for the rates, all you can do is shop around. a>
2016-05-28 01:48:18 · answer #2 · answered by ? 3 · 0⤊ 0⤋
The insurance company being bankruptcy doesn't protect you or your business from liability. As any judge will tell you, you are liable whether insurance pays or not. The second one finds out that happens to their insurance company, they should change policies.
2007-11-06 17:27:14 · answer #3 · answered by Lesley 5 · 1⤊ 0⤋
Thats a more complex question than meets the eye.
A true insurance company can't file bankruptcy. It can be in a state liquidation proceeding. There are complex procedures whereby the insurance obligations are to be honored or protected in a state liquidation proceedings to the extent possible.
Insurance does not discharge the obligation. In indemnifies or protects against it. If your insurance fails because of failure of the insurance company, you, as the principal obligor, continue to remain liable on the insured obligation.
2007-11-10 15:05:51 · answer #4 · answered by DLeibowitz 5 · 1⤊ 0⤋
When an insurance company goes bankrupt, the insurance coverage will continue and the policy claims will be covered and paid by state insurance guaranty associations.
2014-10-30 15:42:24 · answer #5 · answered by Anonymous · 1⤊ 0⤋