Four Claimants, One $300,000 Occurrence Limit
Devon carries a California personal auto policy with liability limits of 100/300/50, a $1,000 collision deductible, and no umbrella. On March 8 he runs a red light while texting and strikes another car. The other driver's taillight was burned out, but the investigating officer finds the taillight played no role in the crash. Injuries: Passenger A, $340,000; Passenger B, $120,000; Passenger C, $45,000. Devon's roommate, riding with him, has $25,000 in injuries. Devon's own car has $9,000 in damage. A's attorney sends a demand for the $100,000 per-person limit on April 1, supported by clear liability and complete medical records; the adjuster sits on it for four months while "investigating."
1. Allocate the 100/300 limits among the four injured people. Show the total paid and each claimant's shortfall.
Read the worked answer
Apply per-person limits first, then test the per-occurrence limit.
| Claimant | Damages | Paid | Shortfall |
|---|---|---|---|
| Passenger A | $340,000 | $100,000 | $240,000 |
| Passenger B | $120,000 | $100,000 | $20,000 |
| Passenger C | $45,000 | $45,000 | $0 |
| Roommate | $25,000 | $25,000 | $0 |
| Total | $530,000 | $270,000 | $260,000 |
Key checks:
- The $100,000 per-person limit caps A and B regardless of the size of their damages.
- The total of $270,000 is still under the $300,000 per-occurrence cap, so no proration among claimants is needed yet. Only $30,000 of occurrence limit remains.
- If a fifth claimant with $60,000 in injuries surfaced, only $30,000 would be available; the carrier would have to distribute the remaining occurrence limit fairly among the competing claims rather than on a first-come basis.
- The $260,000 shortfall does not disappear - those claimants pursue Devon personally. Liability coverage is a floor, not a shield.
2. Does the burned-out taillight reduce anyone's recovery in California?
Read the worked answer
No - on these facts the defense is worth zero.
- California is a pure comparative fault state: a claimant's recovery is reduced by the percentage of fault attributable to that claimant, but only for negligence that was a proximate cause of the injury.
- The burned-out taillight is arguably negligent equipment maintenance, but the officer's finding that it played no role in a red-light, texting-related intersection collision breaks the causation chain. No causation, no reduction - 0%.
- The argument would matter in a rear-end case at night, where a nonfunctioning taillight could be a factual cause of the impact. Here it would be excluded as irrelevant or, at most, raise a nominal 1–2% allocation.
- Adjusted figures after 0% reduction: A $340,000, B $120,000, C $45,000, roommate $25,000 - the allocation in the first task stands unchanged.
3. What is the significance of the adjuster's four-month silence after a clear-liability demand for limits?
Read the worked answer
This is the highest-risk fact in the file.
- An insurer that receives a reasonable opportunity to settle within limits, with clear liability and damages exceeding limits, and fails to do so exposes itself to an excess judgment. California permits a plaintiff who obtains a judgment above the limits to pursue the insurer directly under Insurance Code §11580(b)(2), and the insured may assign the bad faith claim.
- The economics are stark: A's damages of $340,000 versus a $100,000 limit means up to $240,000 of potential excess exposure riding on a demand the adjuster could have accepted on day one.
- Silence is also a claims-practices problem - California's fair claims settlement regulations require acceptance or denial within 40 days after proof of claim and responses to communications within 15 days. Four months of "investigating" a file with clear liability and complete records invites a Department of Insurance complaint.
- Practical answer: evaluate and respond to the demand promptly in writing, document the basis of any counteroffer, and consider tendering limits where liability is clear and the per-person limit is exhausted by the claim. Delay adds no defense value here - it only adds exposure.