Auto Insurance Claims: settlement without involving insurance, timely matter, precarious situation

Question
A car backed into the passangers side of my car as she was pulling out of a parking spot.  She claims she did not see me.  I got all of her insurance information but she requested to leave insurance company out of it and that she would pay me in cash if I could get some estimates.  Is this illegal?

If not, are there any consequences waiting to report this accident to her insurance company if she decides not to pay cash for the damages.

Answer
It is perfectly legal for someone to settle their own damages.  However, it creates a precarious situation with insurance in the event that they do not pay up.  There are two reasons for this.

First, if the person fails to report the accident to their insurance company in a timely matter, the insurance company may deny the claim as they could lose their right to investigate while all of the facts are fresh.

Secondly, an individual cannot legally obligate their insurer to liability where the insurer was not a party to the settlement.  

If you are willing to get your estimates quickly and they are willing to settle quickly, then that may seem ok at first.  However, what if the shop has part price increases or finds hidden damage?  Will you be able to go back to that person then?

Most people have no idea how expensive body repairs can get and once they are presented with the estimates, will likely use insurance anyway.  Therefore it is best for the protection of both parties to allow the insurance to handle it from the start.

Good luck!