If you crash a rental plain the rental company's insurance will pay
them but the insurance may come after you. The fact that the rental
company has insurance doesn't relieve you of liability to pay the
rental company for any loses not covered by insurance or liability to
the insurance company for anything they paid on behalf of the
insured.That is why you need renter's insurance.

It is possible that the man in the condo did not have insurance or had
only partial coverage on a depreciated value.

Even in you example of auto insurance, that procedure is for small
claims. If you are talking big bucks liability then it can become a
matter settled in a court of law.