Why Can’t a Jury Hear About the Existence of Insurance in a Lawsuit?

Did you know that in a personal injury trial, it’s forbidden to inform the jury that the defendant has an applicable insurance policy to cover the damages (money) being sought?

The idea behind this rule is that juries could, in theory, be swayed to award higher damages to the plaintiff if they know that an insurance company is on the hook, and not the defendant.

In reality, if there is an applicable liability policy (and there usually is), the insurance company is responsible for paying any awards within the policy limit, and is responsible for making the decisions regarding whether or not to settle the case out of court or take the case to trial (although there’s an exception with medical malpractice cases, but we won’t get into that here). It is also the insurance company that hires and pays the lawyer who represents the defendant in court. In many cases, these defense lawyers actually work as in-house counsel for the insurance company, and defend their company’s interests in any personal injury claim.

The effects of withholding insurance information.

While the rule does make sense in many situations, it can also result in less-than-fair jury awards to those seriously injured. When jurors believe that the defendant must pay any awards out of pocket, they can be hesitant to award the victim 100% of his or her actual damages—especially in cases with high damages such as a catastrophic injury or wrongful death.

Even if the party that is responsible for an injury is a relative or close friend of the party who was injured, they do not control whether or not their insurance company pays the claim. If their insurance company refuses to fairly negotiate a settlement, your attorney will likely have to name your friend or family member in the ensuing lawsuit. This can look bad to a jury when one party is suing a family member in court, and the insurance company is very aware of this.

A real-life example:

Remember the story a few months back where a New York woman sued her own nephew over a broken wrist? The public backlash was overwhelming. No one could fathom why this “aunt from hell” would sue her own nephew for $127,000. I mean, he’s just a child! It would take him a lifetime to pay that debt. Only after the case was decided (and the woman was awarded $0) did the true details come out.

The truth was that she was never seeking money from her nephew; she was seeking to get her existing medical bills covered by the applicable homeowner’s insurance policy. Prior to the trial, the insurance company offered her $1 to settle. That’s right; one single dollar. Talk about an insult…

Unfortunately, the insurance company wasn’t budging and the woman’s only option was to file a lawsuit. Even though her dispute was with the insurance company, they could not be named in the lawsuit. Instead, she had to name her nephew.

If the jury was able to hear the full details of this woman’s claim, do you think they would have came to the same conclusion? Sure, it’s possible. Unfortunately, we’ll never know.

Final thoughts.

If nothing else, this article should demonstrate the complexity of a personal injury lawsuit, as well as why it is so important to have an experienced attorney to guide you through the process.

Insurance companies will use every advantage they have in order to reduce the value of a claim, and they know that juries are likely to award lower damages in certain types of cases when brought to trial.

By hiring an attorney, you can protect yourself against some of these underhanded tactics, giving you the best chance at a fair settlement or jury verdict.