What happens if the at fault driver does not tell his insurance company about an accident?

Answer 1

Insurance policies uniformly have provisions that require an insured to notify the insurer of an incident that could result in a claim. The requirement is usually phrased in terms of the notice being required "as soon as practicable". This eliminates the need for immediate notification, but does suggest that the notice be given as quickly as can be done under all of the circumstances.

The failure of the insured to timely notify the insurer could result in the insurer denying coverage for the claim. That is, the insurer may take the position that it has been prejudiced by the late notice (or lack of notice), and that it will not defend the insured or pay damages for which the insured may be legally liable. The basis for the claim of prejudice generally is that the insurer was not given the chance, because of the late or lack of notice, to investigate the claim, develop a defense, and/or compromise with the person claiming damages.

If the insurer does this, and the insured challenges the legitimacy of the denial of coverage, it will usually be the insurer's burden to prove that there really was prejudice. Sometimes that occurs in the context of a lawsuit brought by the insured against the insurer where the insured is seeking coverage. Sometimes it occurs in the context of a lawsuit brought by the insurer against the insured (often called a "declaratory judgment action") where the insurer asks the court to determine whether or not it is liable under the policy.

In other cases, when the amount of money sought by the adversary is fairly small, the insurer will not push the issue and will overlook the late notice or lack of notice. In those cases, the insurer will in effect determine that it is not worth the time, effort or expense to try to avoid coverage based upon a late or no notice defense. Instead, the claim will be handled as any other.