What happens when you are hit by someone and they have no liabiity insurance?

I was rear ended on the freeway last weekend by a POLICE OFFICER. He admitted that he was totally at fault, we exchanged information (Insurance / License / Phone, etc.) The following monday, my insurance adjuster called me and told me after contacting his insurance co., they said he cancelled his policy with them a year ago, and has no coverage. He admitted to having no insurance after calling to make sure my 3 year old and I were ok physically, and agreed to make all monetary restitution. What rights do I have, and what is the punishment for driving without auto insurance. I thought that was MANDATORY!!!