Who Pays When Insurance Fails?
The Case for Motor Insurance Reform in the Cayman Islands
Every year, people in the Cayman Islands are injured on our roads. They are drivers and passengers, but also cyclists, pedestrians and other innocent road users. For some, the consequences of a collision are relatively short-lived. For others, the injuries are life changing.
Those who are injured need access to emergency medical care, specialist care, rehabilitation, psychological treatment, rehabilitation and, in serious cases, lifelong medical and personal support. They may also be unable to work for months, years, or permanently.
This raises an important question for Cayman:
What happens to an innocent accident victim who is seriously injured by a motorist who is uninsured, inadequately insured, or whose insurance does not respond to the claim? And just as importantly: who ultimately pays?
At present, too often, that burden risks falling upon the injured person, their family and, ultimately, the Cayman Islands Government and the public purse.
Compulsory Insurance Should Mean Meaningful Protection
The laws of the Cayman Islands require motorists to carry third-party motor insurance before they can legally operate a vehicle on our roads.
The principle is straightforward. Driving creates risk. If a driver negligently injures another person, there should be insurance available to compensate the innocent victim for the consequences.
Our present compensation system is predominantly fault-based. This means that considerable attention is necessarily directed toward determining who caused an accident and whether another party was legally responsible for the resulting injury.
Accountability is important. However, the practical difficulty arises when an innocent person is seriously injured by a motorist who is uninsured, inadequately insured, or where insurance coverage is unavailable or denied for reasons entirely outside the injured person’s control.
An injured pedestrian, cyclist or passenger had no involvement in choosing the negligent driver’s insurer, paying the premium or ensuring that the driver complied with the terms of the policy.
Yet it can be the innocent victim who suffers the consequences when adequate insurance is unavailable. That is the gap Cayman needs to address.
Reality Check: The Cost Does Not Simply Disappear
When an injured person cannot recover the cost of necessary treatment and rehabilitation from the responsible motorist or an insurer, those costs do not simply disappear.
Someone pays.
The burden may fall upon the injured person’s family. It may fall upon an employer. It may fall upon the private healthcare insurance or have to be met by Government.
We already know that the wider cost of inadequate insurance coverage in Cayman is substantial.
As reported by Cayman News Service in its September 2023 article, “Surplus expectations fall to low of CI$3.3M,” Government was then seeking more than CI$31 million in additional appropriations for the growing local and overseas healthcare costs of uninsured and underinsured persons. That figure was not specific to motor vehicle accident victims, but rather related to uninsured and underinsured healthcare costs generally.
More recent reporting indicates that the problem has continued. In June 2025, Cayman News Service reported that Finance Committee approved a further CI$20.54 million for tertiary medical care, locally and overseas, for Caymanians who were uninsured or inadequately covered, together with CI$8.25 million for medical care for indigents. The Finance Minister reportedly warned that the additional healthcare funding would not be sufficient for the entire year and that further funding was expected to be required.
Again, these figures are not specific to road traffic accidents, and they should not be represented as such. What they do demonstrate is that the financial consequences of inadequate insurance coverage are substantial, continuing and not merely a historical concern.
Road traffic injuries form one part of that broader problem. Unlike many other circumstances giving rise to uninsured medical expenses, however, motor vehicle use is already subject to compulsory third-party insurance precisely because of the risk that motorists pose to others.
That makes the policy question particularly compelling: if insurance is compulsory for the protection of third parties, should there not also be an effective mechanism to protect an innocent third party when that compulsory insurance is absent, inadequate or otherwise fails to respond?
Why Reform is Needed
A comprehensive mechanism for addressing uninsured and inadequately insured road accident claims is lacking in the Cayman Islands.
Where Government ultimately bears healthcare costs arising in circumstances where adequate insurance is unavailable, the financial consequences of the underlying risk are shifted away from the motorist and the private insurance arrangements intended to respond to that risk.
That raises an important policy question about whether the existing system allocates responsibility fairly and effectively.
If Cayman requires every motorist to purchase insurance precisely because operating a vehicle creates a risk of injury to others, then we should also ask whether our legislation provides sufficient protection when that compulsory insurance system fails an innocent third party.
What happens when the negligent driver has no valid insurance?
What happens when insurance coverage is denied because the policyholder breached a policy condition that had nothing whatsoever to do with the innocent victim?
What happens when a victim suffers catastrophic injuries requiring hundreds of thousands—or potentially millions—of dollars in future medical care and support?
These are not merely theoretical questions. They have very real consequences for injured people, their families and Government.
The Innocent Victim Should Not Bear the Insurance Risk
There is a fundamental distinction between the person who purchases an insurance policy and an innocent third party who happens to be injured by that person.
The policyholder chose the insurer. The policyholder agreed to the policy conditions. The policyholder was responsible for paying the premiums and complying with those conditions.
The innocent pedestrian, cyclist, passenger or other motorist did none of those things.
Yet when insurance is unavailable, it may ultimately be the injured third party who suffers the greatest consequences.
A compulsory insurance system should be designed first and foremost to ensure that innocent third parties have meaningful protection.
If the law mandates insurance for the protection of other road users, there should be an effective safety net when the ordinary insurance arrangements fail.
What Could Reform Look Like?
There are a number of models that Cayman could consider.
One is the creation of an industry-funded uninsured and unidentified motorist compensation scheme, funded by insurers participating in Cayman’s compulsory motor insurance market. Such a scheme could provide a defined source of compensation where an innocent victim is injured by an uninsured or unidentified driver, subject to appropriate safeguards and eligibility requirements.
Another is to strengthen compulsory insurance requirements so that the protection available to innocent third parties is less vulnerable to disputes between an insurer and its policyholder.
Government could also examine whether existing minimum levels of third-party coverage remain adequate given the modern cost of medical treatment, rehabilitation, loss of earnings and long-term care.
There should also be an effective mechanism allowing Government to recover appropriate medical and support costs from responsible insurers, motorists or compensation schemes, rather than leaving Government to absorb costs that might more appropriately be met through the motor insurance system.
Any reform should be carefully designed to prevent abuse, establish appropriate eligibility criteria and preserve legitimate defences. But the need for appropriate safeguards should not prevent the creation of an effective system for innocent victims.
Insurance Reform Must Go Hand in Hand with Road Safety
Compensation is only one side of the equation.
The best accident is the one that never happens.
Any reform of Cayman’s motor insurance system should form part of a broader road-safety strategy. This should include improved driver education, meaningful enforcement of traffic laws and appropriate consequences for dangerous and repeat offenders.
Insurance pricing can also play a role. A properly functioning risk-based insurance market should ensure that motorists with poor driving histories bear an appropriate share of the financial consequences associated with the risks they create.
Safer drivers should not continually subsidize dangerous ones.
A Question of Fairness
The Cayman Islands has grown enormously. Our population has increased, the number of vehicles on our roads has increased, and the financial consequences of serious injury have increased with them.
Our insurance framework must evolve accordingly.
At its heart, this is a question of fairness.
If the law requires motorists to purchase insurance to protect third parties, then the system should actually protect those third parties when they are innocently injured.
A person who suffers catastrophic injuries because of somebody else’s negligent driving should not discover, at the worst moment of his or her life, that there is no meaningful source of compensation.
Nor should Government routinely be required to assume substantial healthcare costs arising from road traffic injuries in circumstances where those costs could more appropriately be addressed through a properly structured compulsory motor insurance regime.
That should prompt a broader discussion about where the financial responsibility properly belongs when an injury arises from the use of a motor vehicle in a jurisdiction where third-party insurance is already compulsory.
It is time for Government, the insurance industry, healthcare providers, the legal profession and road-safety stakeholders to examine whether Cayman’s existing system provides adequate protection for innocent road users.
The objective should not be controversial:
Protect innocent victims. Ensure that the financial consequences of road risk are borne appropriately by those who create and insure that risk. Reduce the financial burden on Government. And make Cayman’s roads safer for everyone.
By Tiziana Romano, Partner, Broadhurst LLC
*The views expressed in this article are those of the author and are intended as general commentary on motor insurance and road-safety policy. They do not constitute legal advice.
