What is a Policy Limits Claim/Case?

A policy limits claim or case is simply an auto insurance situation, in which one or more of the responsible parties does not have sufficient insurance coverage, to pay the amounts he/she owes for damages and/or injuries.

When you purchase an insurance policy you have several policy limit options to choose from.  Very few insurance consumers truly understand the potential consequences of this decision.

Insurance limits are meant to cover particular exposures to loss.  Each of the limits on the Declarations Page of your insurance policy is for a very specific purpose.  If you do not have enough coverage in one particular area, for instance bodily injury, you can not apply limits from another category to the claim.  This is why the choice you make should be based on the highest possible payout for an exposure.  You might think of your decision as making sure you have enough limit dollars for the worst case scenarios.

Policy limits claims are rare but do occur. Typical situations are; (1) a passenger in the other vehicle is injured in a crash and she/he has a highly unusual medical outcome, such as an unsuccessful surgery, (2) there are 5 passengers in the other vehicle and they all require extended medical treatment, (3) you are responsible for a multi-vehicle pile-up, (4) you have a passenger in your car and he/she loses a limb in an accident, in which the other, responsible, driver is uninsured.

Deciding how high your limits should be also depends upon the value of any assets you want to protect from court attachment.  If you own a home you have more assets to protect, than if you are renting.

When a crash results in a “policy limits claim” a lawsuit may be filed. This is when you are involved in a “policy limits case”.  There are “policy limits claims” however, that do not involve a suit.

In the course of handling a claim, the “adjuster” gathers information, from each of the other "company  adjusters”,  involved in handling the claim. Each company submits a “subrogation” claim to the responsible party’s company for the amount of their property damage. There are times when suddenly it becomes clear that the policy limits are not enough to cover the full amount of all the damages.  In the case of property damage, this is when the responsible party’s adjuster sends a letter to all the other companies involved in handling the crash, letting them know that it appears they are involved in a “policy limits claim”.

There are many claims in which more than one party is responsible for the accident. In this case one of the adjusters, whose insured party has the majority of the responsibility in the accident, becomes the “lead adjuster” who presents the claims of all benefiting companies, to the responsible party’s insurance company, and negotiates on everyone’s behalf.  All claiming companies must agree to the lead adjuster’s role and decisions.

A “policy limits claim” notification letter, puts all parties that are owed monies, on notice, that they may not collect all of the money to cover their damages, from the responsible party’s insurance.  Each of the adjusters involved in handling a “policy limits claim” must then notify their insured party. The adjuster for the responsible party must notify his/her insured that he/she is facing a “policy limits claim”, and that his/her personal assets may be at risk of attachment in a lawsuit.

If there are no injuries involved in a crash and there is a “policy limits claim”, the responsible party’s adjuster or lead adjuster for the responsible parties, waits till all property damage repairs are completed and all total loss evaluations are in.  When all the final repair bills, and any supplemental damages discovered in the course of repairs, or increases in parts prices, are accounted for, the amount to be paid is apportioned based on the percentage of liability, and the percentage that each claimant’s damages bear to the total amount of damages.  A letter is then sent to all the adjusters involved in handling the claim, spelling out the full amount of damages of each party and the proposed apportionment.  All adjusters must agree to full and final settlement at the apportioned amounts, and obtain a full release from their insured parties, in order for the “policy limits property damage claim” settlement to be concluded.

As you can imagine settlement of any “policy limits claim” can be very complicated. Sometimes one of the party’s is uninsured, and although apportionment may be possible, this fact precludes conclusion without attorney involvement. 

If the reason for the apportionment is inadequate, but statutorily adequate limits, an underinsured motorist claim can be presented to each party’s own insurance carrier for the balance of the damages.  This sometimes allows the conclusion of a “policy limits claim” without litigation, when it might not otherwise be possible.

If there are injures as well as property damage the apportionment for the injury claims is done on the basis of the dollar amount of the bodily injury demand each claimant has, in relation to the full dollar amount of all bodily injury demands.  It is important for the responsible party’s adjuster or lead adjuster to notify all parties to the claim, early on, of the limits issue.  This allows all party’s to make the economic adjustments in treatment, to allow a settlement under these less than ideal conditions.

There are times that a “policy limits claim” results in an Intercompany Arbitration filing by one of the adjusters.  In this case all parties to the claim must await the written decision of the Arbitration Panel.

It is possible to have two apportionments simultaneously in a “policy limits claim/case”;  one for the liability determination,  and another for the policy limits allocation.

Needless to say, if you are ever involved in a “policy limits claim/case”, the time frames for all aspects of the claim tend to be much more lengthy, due to the importance of awaiting the conclusion of repairs and treatment, before being able to formulate an apportionment.  The notification requirements, and importance of agreement by all parties, also tend to cause longer handling times.  Be sure to bring plenty of patience to bear, if you are ever in this situation.  The complexity of a “policy limits case/claim” simply demands it.