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The Georgia Rule actress lost control of her Mercedes convertible at around 5:30 a.m. on Saturday, hitting a curb and trees, and was taken to Century City Hospital where she was treated for minor injuries.
She was arrested on suspicion of driving under the influence (DUI) after police found a "usable amount of illegal narcotics," thought to be cocaine, at the scene of the crash.
Lohan had been out with friends, including Paris Hilton and singer James Blunt, at club Les Deux prior to the accident.
Reports suggest the 20-year-old was embroiled in a bitter exchange of words with Ronson, the younger sister of producer/DJ Mark Ronson, when she smashed her car into a palm tree.
A source tells British newspaper the Daily Mirror, "She was trying to talk to Sam--they were screaming, obviously arguing, and Lindsay was heard to shout, 'You f**king lesbian b*tch.'
"Lindsay drove her Merc over to Samantha and told her to get in, but Sam said no.
"There was a bit of a fracas and Samantha eventually got into the car...Lindsay seemed completely wasted--in no condition to be behind the wheel."
Lohan is due in court to face the DUI charge on Aug. 24.
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