What is the history California’s Financial Responsibility Law? Ever since the first automobiles began slogging through the dusty roads of early California, there has been an awareness that the ownership and operation of these marvelous machines can, at times, result in personal injury or property damage. Prior to 1920, the vast majority of automobiles were owned by affluent people with the financial stability to pay for incidents involving traffic collisions. With the advent of automobile assembly lines and more reasonably priced vehicles, the average citizen was able to afford an automobile of their own.
As the number of vehicles being operated on public roadways increased, so did the number of traffic collisions. It quickly became apparent that low-income families were not able to pay for the damages they caused in traffic collisions and many victims and property owners were not being made whole.
In 1927, Massachusetts became the first state to pass a law requiring all motor vehicle owners to maintain liability insurance. Over the next 30 years, many states introduced bills to compel vehicle owners to maintain insurance coverage, but for the most part, few of those bills became law. In 1956 New York established a compulsory insurance system. Today, there are compulsory liability laws in 49 states and the District of Colombia. The State of New Hampshire is the only state not requiring such coverage.
In 1974, the California State Legislature passed a series of laws which compel all persons who own or operate a motor vehicle in the State of California to maintain liability insurance. Compelling citizens to purchase and maintain auto insurance is often easier said than done. Laws in most states have proven ineffective in reducing the number of motorists who drive without proper insurance coverage. It is estimated that approximately 14 percent of drivers in the United States do not maintain proper automobile insurance.
Recent changes in electronic reporting requirements seems to be having a positive impact in reducing the numbers of uninsured motorists, however, California still leads the nation with approximately 4.1 million drivers operating motor vehicles without proper liability insurance.
With nearly 40 million residents and more than 164,000 square miles of territory, California has 67 interstate highways that pass through a wide variety of topography and weather conditions. From the fog of San Francisco, the snow in the Sierra Nevada mountains, and the sprawling deserts of the eastern Mojave desert, California drivers can encounter a wide variety of driving conditions in a single day. As a result, California leads the nation in the number of fatality traffic collisions with nearly 3,000 people being killed each year on the State’s highways. In Los Angeles alone, LAPD investigates approximately 20,000 hit & run traffic collisions each year. Consequently, the numbers of persons injured and the financial impact from property damage are quite staggering.
What are California’s Financial Responsibility Laws?
California’s Financial Responsibility Laws are laid out in sections 16000 through 16078 of the California Vehicle Code.
The Financial Responsibility Law is compulsory, it is not optional. Any person who owns or operates a motor vehicle in the State of California, must be capable of providing monetary protection and compensation to those persons who may be injured or suffer property damage as a result of a traffic collision. These laws are in place to provide compensation to the injured or damaged without regard to the cause of the accident or any issue of negligence.
As a result, it is mandatory that any owner or operator or a motor vehicle in the State of California be able to prove they have the financial capability of making a victim or property owner whole again. Financial Responsibility may be proven in one of the four following means:
- The most common means of proving Financial Responsibility is through a liability insurance policy underwritten by an insurance company authorized to do business in the State of California.
- A cash deposit on file with the Department of Motor Vehicles in the amount of $35,000.
- A surety bond in the amount of $35,000 obtained from a company authorized to do business in the State of California.
- A “Certificate of Self-Insurance” issued by the Department of Motor Vehicles.
California State Law requires that you be financially responsible for any injuries or property damage occurring as a result of the operation of a motor vehicle. It is illegal to drive a motor vehicle if you are not financially qualified to coverage injuries or damages to another.
The minimum amount of coverage required by California Law is:
- $15,000 for a single death or injury;
- $30,000 for death or injury to more than one person;
- $5,000 for property damage
Reporting to DMV:
California Law requires that all “reportable” traffic collisions be reported to the California Department of Motor Vehicles within ten days of the event. A “reportable” traffic collision is any accident when:
- Anyone is injured (however slight) or killed;
- Damage to the property of any person exceeds $750.
A reportable traffic collision must be reported to the Department of Motor Vehicles by filing a Traffic Accident Report Form SR-1. Failure to report a traffic collision to the DMV within ten days may result in the suspension of your driver license. Even if you are not at fault, all drivers are mandated to file an SR-1 Form if they are involved in an accident.
Why does the DMV suspend a driver license for not having Auto Insurance?
As stated above, California’s Financial Responsibility Laws are compulsory, they are not optional. Because so many drivers continue to ignore the laws regarding financial responsibility, the California Legislature passed laws designed to penalize those persons who knowingly own or operate a motor vehicle without proper financial responsibility. To be blunt, the DMV will punish any person who owns or operates a motor vehicle without proper financial coverage. That punishment comes in the form of the suspension or revocation of the offender’s privilege to drive.
If the DMV discovers you owned or drove a motor vehicle that was involved in a reportable traffic collision and that you did not maintain financial responsibility at the time, your driver license may be suspended for up to 4 years.
How can I protect myself in a Financial Responsibility suspension?
If you have received an “Order of Suspension/Revocation” from the California DMV because they believe you have violated the Financial Responsibility Law, all is not lost. You have an absolute right to fight to protect yourself and your driving privilege. Before the DMV can suspend or revoke your driver license, you are entitled to conduct a Financial Responsibility Hearing at the DMV. Furthermore, you are entitled to be represented by one of the most experienced professionals in the field.
If the DMV is seeking to suspend or revoke your driver license for an issue of Financial Responsibility, call the DMV Defense Experts at California Drivers Advocates. Everything the DMV does is time sensitive so don’t delay. Call CDA today.
More about Financial Responsibility Hearings at the California DMV