What Happens If I Hit a Stop Sign? Get Ready to Pay Up

One of the primary reasons motorists purchase a new auto insurance policy is to cover the cost of damage to other vehicles in the event of a collision. But what if the damage includes state or municipally owned property, such as street signs and guardrails? It turns out that drivers are also liable for such expenses.

"It's just like any other property damage you might cause in an accident," says insurance attorney Lynette Simmons Hoag in Chicago. "And the city or state will charge you."

The problem is that states have historically had a difficult time accurately collecting money for damage to public property. Bureaucratic lag time and fault disputes are frequently to blame, which is why many states are looking for new ways to get the money.

How States Collect for Damaged Stop Signs and More

The Indiana Department of Transportation, for example, recently unveiled a new strategy for locating motorists who cause damage to state property in car accidents. The new programme, which began in July 2011, provides police officers with kits containing tags that can be attached to damaged fixtures at an accident scene, such as guardrails and stop signs. The officer then writes down an accident number and the date of the crash on one of the tags so state officials can call up the report and identify the motorist responsible for the damage.

Florida, Minnesota, North Carolina, Texas, Kentucky, and Tennessee are all taking a similar approach.

"The department has incurred significant financial losses in the past when repairing damaged state property because the responsible parties can't always be identified," says Will Wingfield, a spokesman for the Indiana Department of Transportation. "This new programme should assist in bridging that gap."

Consider that Indiana billed insurers and motorists for $3.5 million in damaged state property over a 15-month period ending in February 2009, but only recovered $1.8 million.

In contrast, Indiana's new programme allowed officials to charge motorists and insurers more than $2 million between October 2011 and March 2012, a significant increase from the $1.4 million billed in 2010. All told, state officials are hoping to collect up to $4 million a year through this new programme.

Wingfield claims that Indiana has improved not only the accuracy of data collection, but also the speed with which it bills a driver's insurance company. This is significant, he says, because if too much time passes between the time damage occurs and the time the state sends a bill for reimbursement, it becomes difficult to prove conclusively that the damage was caused by a specific crash.

For instance, the Indiana Department of Transportation sent a $1,641 bill to insurance company The Hanover on Jan. 29, 2009, for damage to a guardrail that occurred during a policyholder's wreck six months earlier. Because of the half-year delay, photos of the damaged guardrail did not accurately represent what it looked like after the accident, according to Hanover, and the state was forced to settle for $820 from the insurance company.

How At-Fault Drivers Are Billed for Damaged Public Property

The short answer is that each state handles it differently. Some jurisdictions, like Chicago, bill the driver directly, while others first contact the driver's insurance company.

"Chicago is very aggressive in pursuing people who cause damage to public property," Hoag says. "The responsibility will fall on whoever the vehicle is titled to, and the city will serve that person with a complaint. If you have decent insurance, that would cover it. Otherwise, it's just like any other debt."

Almost every state sends invoices and pursues collections through a public agency. Oklahoma and Massachusetts are the only exceptions.

Oklahoma hires a consultant to create invoices and track collections for accidents involving state property damage. The consultant does this using police reports without visiting the crash site and then negotiates with a driver or insurer for repair costs.

According to the Massachusetts Department of Transportation, an insurer must select an approved contractor and pay the contractor directly for repairs. When a crash involves damaged state property and does not need to be repaired within two days, the transportation department prepares a cost estimate for the driver or insurance company to put out for bids. The driver or insurer selects the preferred contractor, obtains state approval to work from the state, and then pays the contractor directly.

"Even though they all handle it differently, every state has the legal right to pursue drivers for these costs," says Eli Lehrer, vice president of the Heartland Institute, a nonprofit research center. "Someone must pay."

Will Your Auto Insurance Cover the Damage?

Regardless of how you receive the bill, the liability coverage on your auto policy will cover this type of damage. According to Hoag, consumers should carefully read their policies to ensure that state-owned property damage is not excluded.

"For the most part your liability coverage should take care of this type of damage," Hoag says. cautionary people

The key question regarding who will foot the bill, according to Dave Snyder, vice president and associate general counsel at the American Insurance Association, an industry trade group, is always: Who was at fault?

"This isn't always an easy question to answer because it's entwined with so many other factors," Snyder says.

For instance, did the driver do something wrong, such as speed or make an illegal turn, which caused the damage? Was the structure ever damaged before? Is it possible that multiple vehicles were involved?

"Drivers should not automatically assume responsibility," Snyder says. "If you receive any notification from the state, you should contact your insurance carrier or agent immediately to determine whether or not this type of claim will be covered."

Situations like these are why it is so important for drivers to get multiple free car insurance quotes with a good amount of coverage.

Be on the Lookout for Extra Administrative Fees

Expect the repairs to be more expensive than you anticipated. According to Lehrer, states often assess fees and other charges that the average driver might not expect.

For example, the most common indirect fee — one that is not directly related to repair costs — is known as "the fringe fee," and 11 states charge between 48 and 181 percent on top of direct repair costs. In Indiana, for example, a 76 percent surcharge is added to every invoice for damaged state property.

Overhead and administrative fees also are levied by a few states, but these often are employed as bargaining chips with a driver or insurance company.

"Even if it's something minor, like running a stop sign or backing into a light post, the state can charge a lot," Lehrer says. shock value