> They are telling the government they will pay out if the insured party is at fault for an accident
No, they aren't.
They are telling the government and their customer they will pay out if the insured party is found to be legally liable for injury or property damage while driving. (That is, in exactly the situations where the customer would legally be obligated to pay.)
They are also telling their customer that they will defend them from such claims to the extent reasonable, settling where it makes sense to contain liability. That is actually a big part of why one would pay for insurance rather than posting a liability bond (as most states allow) unless you have the funds to keep a general attorney on retainer and seek task-specific representation as needed.
Had they paid out when there was no expectation you would establish liability, that would be a scam against their paying customer.
No, they aren't.
They are telling the government and their customer they will pay out if the insured party is found to be legally liable for injury or property damage while driving. (That is, in exactly the situations where the customer would legally be obligated to pay.)
They are also telling their customer that they will defend them from such claims to the extent reasonable, settling where it makes sense to contain liability. That is actually a big part of why one would pay for insurance rather than posting a liability bond (as most states allow) unless you have the funds to keep a general attorney on retainer and seek task-specific representation as needed.
Had they paid out when there was no expectation you would establish liability, that would be a scam against their paying customer.