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Driver License Suspension for Financial Responsibility

Why does the DMV Suspend a driver license for Financial Responsibility?  In 1974, the California State Legislature passed a series of laws designed to ensure that those persons who are injured, killed, or suffer property damage in traffic collisions be compensated for their losses.

For decades, California has led the nation in all forms of traffic collisions, including those where citizens are injured or killed, and history was replete with examples of innocent people who were damaged, but able to recover compensation because the other party was not properly insured.

California is home to nearly 39 million people, many of whom drive on our roadways each day. With nearly 164,000 square miles and 67 Interstate Highways, California is a diverse “melding pot” of cultures and driving habits. Consequently, California routinely leads the Nation in the number of traffic collisions, injury traffic collisions, incidents of hit & run, and fatalities. In 2012, the Department of Transportation reported more than 20,000 hit & run traffic collisions and nearly 3,000 fatalities. The annual monetary losses in property damage are routinely into the hundreds of millions of dollars.

Because there is so much sorrow and monetary loss associated with the operation of motor vehicles in the State of California, the Legislature felt compelled to enact legislation designed to ease the burden on those who suffers losses in traffic collisions.

Currently, California Law mandates that any person, who owns or operates a motor vehicle in the State of California, must be able to demonstrate Financial Responsibility when the vehicle is driven. If a motor vehicle is involved in a “reportable” traffic collision and it is discovered that the vehicle was not covered by the minimum “liability insurance” required by law, the driver or the owner of the vehicle may be held liable. In that event, the Financial Responsibility Law is violated and the DMV will take a suspension or revocation action against the involved party. The maintenance of appropriate auto insurance is not discretionary. The legislative intent of the Financial Responsibility Law is that all vehicles be properly insured…… Period!

What is the law involving Financial Responsibility?

California Vehicle Code section 16000 (a), requires:

Every driver and every owner of a motor vehicle shall at all times be able to  establish financial responsibility, and shall at all times carry in the vehicle evidence of the form of financial responsibility in effect for the vehicle.”

This section of the law also defines “Reportable Accident, “ as any accident on a public street or highway that results in any of the following: Any properly damage which exceeds $1000.00, Any injury (however slight) and or Any fatality.

Basically, this means that every person who owns a vehicle, or every person who drives one on a public street or highway, must have auto insurance and must be able to furnish proof of that insurance at the time of any traffic collision.

California Vehicle Code section 16000.1(a) determines;

Even those traffic collisions that occur off-highway are still reportable if; The traffic collision involves a vehicle subject to registration, The traffic collision resulted in property damage of $750 or greater, The traffic collision resulted in an injury to person, however slight and or The traffic collision resulted in the death of any person.

However, a traffic collision is NOT reportable if it occurred on private property, did not result in any injury or death, and any property damaged belongs to the driver or owner.

California Vehicle Code section 16021 establishes;

The minimum amount of insurance, per accident is:$15,000 for a single death or injury, $30,000 for a death or injury to more than one person. and or $5,000 for property damage.

This section also identifies four forms of financial responsibility:

  • A motor vehicle liability insurance policy through an insurance company licensed in the State of California.
  • A deposit with the California DMV in the amount of $35,000.
  • A surety bond for $35,000 from a company licensed in the State of California.
  • A DMV issued self-insurance certificate.

California Vehicle Code section 16070 directs; The DMV to suspend the driver license of any driver or owner who cannot prove that auto insurance coverage was in place at the time of a traffic collision.

California Vehicle Code section 16075(c) requires; The DMV must grant a driver or owner the opportunity for an Administrative Hearing before any suspension or revocation action is taken.

Will the DMV suspend the license of the driver or the owner?

At a Financial Responsibility Hearing, the DMV hearing officer must establish the following issues:

  • Was the accused person the driver or owner of a motor vehicle involved in an accident?
  • Was there property damage of $750 or more; or was anyone injured or killed?
  • Did the accused person have proper auto insurance or other form of financial responsibility at the time of the accident?

Special Note: Many times an accused driver or owner will argue that they were not at-fault in the traffic collision. The cause of the traffic collision is not an issue to be decided at a Financial Responsibility Hearing. For example, a driver could be sitting at a red light minding his own business when he is rear-ended by another driver. Even though he did not cause or contribute to the traffic collision, the DMV will still seek to suspend his driver license if he cannot demonstrate that he had proper auto insurance at the time he was hit.

From a practical standpoint, the DMV will primarily look to the driver to establish Financial Responsibility. This is because all drivers are required to ensure that the vehicle they operate has proper coverage. Many times drivers will believe that they are absolved of responsibility because they were not aware that vehicle’s owner did not have insurance coverage. It is first and foremost the obligation of the driver to confirm the vehicle was insured at the time he or she drove it .

On the other hand, the owner of a motor vehicle may have their driver license suspended in the following instances:

    • At the time of the traffic collision, the vehicle was a driverless “runaway” vehicle. This often occurs when a parked and unattended vehicle suddenly rolls down a hill and collides with other vehicles or property. Because there was no driver to hold accountable, the obligation would then fall to the owner.
    • The driver of the motor vehicle is not known or is not identified. This may occur where an owner’s vehicle is stolen and involved in a traffic collision. If the thief is not identified, Financial Responsibility falls to the owner. In any case whatsoever where the driver is not known, or cannot be established, the owner may have their driver license suspended if they cannot provide proof of Financial Responsibility.


What should I do to protect myself?   If you have received an “Order of Suspension/Revocation” because the DMV believes you drove or owned, a motor vehicle that was involved in a traffic collision while not covered by auto insurance; make no mistake, the DMV intends to strip you of the privilege to drive. They intend to punish you without further consideration.

Because the law mandates that an accused person be given the opportunity to defend themselves, you are entitled to schedule and conduct an administrative hearing before the DMV. These are complicated and often frustrating proceedings that stand no chance of victory without proper guidance.

Call the DMV Defense Experts at California Drivers Advocates, Inc. We have been fighting and winning Financial Responsibility Hearings for many years. We are ready to go to work for you.

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