Rescue Your Revenue

Dividing Up the Pie with Limits Issues

By Kelsea Eckert
Posted Jan 15th 2024 9:51AM

On a scorching summer day in Dallas, Texas, you're maneuvering your hefty truck down Interstate 20. Suddenly, a chatty 18-year-old girl collides with you while on her phone.

Everyone emerges unharmed, but your truck bears a hefty $20,000 in damages. You promptly file a claim with her insurer, State Farm, only to be told that they can't compensate you just yet. "Why the delay? Clearly, it's her fault!" State Farm mentions a potential "limits issue."

Understanding Limits Issues: You ponder, "What's a limits issue?" It arises when the at-fault driver lacks sufficient coverage to cover the claims. The insurer might only be obligated to pay the amount specified in the policy. If it falls short of covering everything, decisions must be made.

As it turns out, the 18-year-old has a meager $10,000 policy. With a $20,000 repair claim, State Farm must grapple with the limits of coverage.

Truck vs. Car Insurance Disparity:

Had it been a hefty truck on the other end, there'd likely be substantial insurance coverage. Most semis carry $750,000 to $1,000,000 in coverage. However, with a car at fault, the policy may be minimal.

In your case, State Farm might offer the full $10,000 policy limits if yours is the sole claim. To receive the funds, you'll likely need to sign a release, forfeiting any pursuit of State Farm or the 18-year-old for additional expenses, like downtime.

Do you have to settle for their 50% offer? No, you don't. Assess all options before deciding.

Considering Legal Action:

Suing the 18-year-old, obtaining a judgment, and pursuing her unprotected assets might be an option, but only if it's worthwhile.

Deciding to Sue:

An asset check helps gauge the worthiness of legal action. Drivers with small insurance policies often lack assets worth pursuing. Ensure litigation is worth the effort, considering even a successful judgment might be futile if the other party has nothing. Bankruptcy could erase the judgment, even if they possess assets.

Alternatives to Lawsuits:

If suing isn't worthwhile, explore other options.

File a Claim with Your Own Insurance Company:

Consider filing a claim with your insurer, especially if the alternative is extensive downtime or going out of business. Ask about subrogation, where your insurer reimburses you and pursues the at-fault party.

Made Whole Doctrine:

Ask your insurer to step aside, allowing you to receive the entire limits amount, making you whole.

Uninsured/Underinsured Motorist Coverage:

Check for UM/UIM coverage in your policy for additional expense coverage not in your physical damage policy.

Safeguard Your Business:

Limits issues are intricate. If facing a claim with inadequate insurance, consult an insurance attorney for guidance. Thorough research, inquiries, and expert assistance can position you and your business more favorably.

The information in this article is general in nature and does not constitute legal advice.