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Client at fault and not insured

Information about what a client can do if they were involved in a motor vehicle accident when they were at fault.

The best way to proceed when a client is at fault will depend on several factors, including:

  • whether or not the client is insured
  • if the client has assets or income
  • if the other party is insured
  • if the other party has obtained a judgment against them.

If client has no insurance

If no paperwork has been received

If the client is at fault, has no insurance and has not received a letter of demand from the other party (or the other party’s insurance company, or their representative), advise the client to come back when they receive a letter of demand.

Client has money and judgment not obtained by other party

If the client is at fault, is receiving income other than Centrelink income, has assets above the value of $7900, and judgment has not been obtained by the other party, then it may be wise to settle the matter, especially if the other party is threatening court action.

If the client wants to dispute the amount of damage they will need to get a report from an independent assessor, which is likely to cost between $275–$350.

Settlement strategies

The other party might agree to the client paying the full amount owing or a lesser amount as a lump sum payment. If negotiating an instalment arrangement, do not make any arrangements if the debt cannot be repaid within 2-3 years. It is unlikely they will be able to stick to any long term plans.

If a lump sum payment has been agreed to, the other party needs to sign a release document. Do not make payment until the release document has been signed and returned to the client.

See Appendix 'XII Letter to insurance company' in Precedents.

Does the client have to complete a financial statement?

Sometimes the other party will only consider settling if a financial statement is completed.

If the client does not want to complete a financial profile then the other party could be advised of the following:

  • ‘The financial statement or profile which you would like me to complete is not dissimilar to the information that could be obtained through an Application for a Summons for Oral Examination. Such an application obviously requires judgment against myself.’

Are financial details of a partner relevant?

Never provide the financial details of a partner to the other party, even if they ask. The other party should be advised that their partner has no involvement in the matter and so would be considered as irrelevant to the dispute. They should also be advised that they do not believe it is reasonable or ethical to provide such information when they:

  • are not the debtor
  • are not involved in the matter, and
  • have refused consent.

Settlement strategies for particular scenarios

Here are some typical case studies and suggested strategies for settling the matter:

Young client living at home

Client is 19, earns $40,000 a year, has no credit card debts and owns a car worth $7800 (less than the current indexed amount that a bankrupt may retain). The client lives with parents and has no dependents. The other party wants $9000 from the client.

Make an initial settlement offer of 30 cents in the dollar. The matter should be settled on about 50 cents in the dollar. The client is in a strong position as they can bankrupt. The client would keep their vehicle if they were to bankrupt. The other party should be reminded of this.

Low income earner with dependents

This healthy client is 37, earns $47,000 a year, is married with two young children and their partner works. They rent and have no savings. The other party wants $8000 from the client.

Make a settlement offer of 35 cents in the dollar. Client should settle on about 45 cents in the dollar. The client is in a strong position as they can bankrupt. The other party should be reminded of this.

Medium to high income no dependents

Client is 27, earns $70,000 a year and is healthy, and is single with no dependents. The client rents and has no savings. The other party wants $10,000 from the client.

Make a settlement offer of 60 cents in the dollar. Client should settle on about 75 cents in the dollar. The client is in a weak position due to relatively high income and bankruptcy may not be the best option.

Home owner with dependents

Client is 45 years of age, earns $55,000 a year, is married with 3 young kids. They own a house with $450,000 in equity and almost no mortgage. The other party wants $5000. This is a difficult situation as client owns a house although other party may not know about this.

Offer settlement of 50 cents in the dollar. Client should settle on about 75 cents in the dollar. The client is in a weak position due to equity in house, a risk if they were sued. Client could consider re-drawing on their mortgage to pay debt.

Client does not work or works part-time earning a minimal salary. They have 3 young kids and own a property with $40,000 in equity. The other party wants $3670 from the client.

Offer settlement of 50 cents in the dollar. The client should settle on about 70 cents in the dollar. The client is in a weak position as they own a property with equity which would be at risk if they were sued.

Alternatively, the client could try to settle the matter by offering to pay the full amount owing by an instalment plan if they cannot pay a lump sum.

See 'Appendix XI Letter to offer settlement' in Precedents.

More information

Reference

Content on this page was originally adapted from Motor Vehicle Accident Manual, 2012. Thanks to Footscray Community Legal Centre inc and to Ali Yildiz and Denis Nelthorpe.

Note: This manual is no longer available.

Acknowledgement

Content on this page was originally adapted from Motor Vehicle Accident Manual, 2012. Thanks to Footscray Community Legal Centre inc and to Ali Yildiz and Denis Nelthorpe.

Thanks to Matthew Martin, Senior lawyer, WEstJustice for assistance with review in April 2019.

Precedent letters

From Motor Vehicle Accident Manual, Footscray Community Legal Centre, Ali Yildiz.

appendix_xi_letter_to_arrange_settlement.doc (doc, 56 KB)(opens in a new window)

Letter to negotiate settlement by instalment plan or in a lump sum.

appendix_xii_release.doc (doc, 56 KB)(opens in a new window)

Letter of agreement for release from further liability.

Updated