What happens when you can't pay for knocking out a traffic light?

Question

Bob caused an accident that resulted in a traffic light being knocked out and damaged. He has little savings and work minimum wage. His insurance has the minimum permissible limits in California. The other driver had no insurance at all. What can Bob do when the city demands that he pays for the traffic light but he has no money or assets?

Answer 1

@DaleM is basically correct, but the way that the issue would present itself is not quite as described in the question.

The city will have insurance that will cover the damage to the traffic light, which will pay the claim. The insurance company will then bring a subrogation claim against the at fault party to recover the money it paid on its claim from the city, which it will pursue only if it makes economic sense for it to do so.

If the insurance company ascertains that Bob is judgment proof (or nearly so), it may decide to not invest the legal fees and time involved in pursuing the subrogation claim, knowing that doing so is likely to be a bad business proposition for it. Or, more likely, the city's insurance company would contact Bob's insurance company and settle for his minimal property damage coverage of $5,000, without bringing a lawsuit.

The city could just sue Bob. But, because Bob has insurance, Bob's insurance company would provide him a legal defense to the city's insurance company's subrogation claim, so the insurance company could expect just a simple default judgment against an unrepresented defendant. Realistically, even in this simple case, the insurance company would be out low five figures of legal fees and litigation costs (like expert witness fees and filing fees), to take the case to trial in this low stakes case.

So, in all likelihood, the city's insurance company would be happy to settle for a policy limits demand (even though it is much smaller than the city's claim for property damage which it paid), and Bob's insurance company would be happy to pay the policy limits demand, because if it didn't it would be exposed to liability for bad faith by a first party insurer for failing to take an opportunity to free Bob of any liability in excess of the policy limits.

Both insurance companies would be paying lawyers out of pocket by the hour, so both would have an incentive to reduce litigation costs if possible.

In contrast, the city's insurer might very well sue the other, uninsured driver, for the amount that Bob's insurance company didn't pay. That driver doesn't have an insurance company to provide a legal defense and will probably default, with minimal legal expenditures by the city's insurance company. The uninsured driver is probably also judgment proof right now. But, the money judgment might be collectible at sometime in the future (e.g., when the uninsured driver wins the lottery or receives an inheritance), and would last long after the statute of limitations to sue over the accident itself expires.

Answer 2

The same things Bob can do when he owes money to anyone

1. Pay it
2. Negotiate a lesser amount the creditor will accept and pay that
3. Negotiate a payment plan acceptable to the creditor
4. Declare bankruptcy
5. Not pay it and get sued, lose, have assets seized, garnishee orders, bankruptcy etc.