A Limits Demand, a Ten-Day Clock, and a Lien
Sandra Kim carries a personal auto policy with limits of $100,000 per person/$300,000 per occurrence and no umbrella. On May 4 she turned left across traffic and struck motorcyclist Mr. Duarte, 41. The police report cites her for failure to yield and two witnesses agree, though Duarte's speed is estimated at 15 over the limit and he has a 2022 DUI. Duarte's counsel demands the $100,000 limit with a 10-day deadline, stating that if the deadline passes he will sue and pursue Ms. Kim personally. Records show $95,000 billed/$41,000 paid for a lumbar fusion, $14,000 in lost wages, a 12% permanent-impairment rating, and a 2019 back injury with degenerative findings. Her specials plus general damages support a value near $260,000. Her health plan asserts an ERISA reimbursement of $41,000. Ms. Kim calls the adjuster, frightened, asking whether she needs her own lawyer.
1. Evaluate the demand. Is $100,000 a reasonable settlement figure, and what must you verify first?
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Value the case before the deadline moves you.
- Rough valuation. Specials of roughly $95,000 billed and a 12% impairment rating with a fusion support general damages in the $120,000–$180,000 range on a clean liability case; total exposure near $260,000. On liability, this insured turned left across traffic with a citation and two corroborating witnesses. Duarte's speed and 2022 DUI are weak comparative-fault arguments; a 10–20% reduction is realistic, not 50%.
- Net exposure. $260,000 × 0.85 ≈ $221,000, well above the $100,000 limit. A limits demand is therefore within a reasonable range, not an opportunistic one.
- Verify before committing. Obtain the operative report and complete billing (not just the summary), the pre-accident records for the 2019 injury, and a physician's opinion on apportionment between the new and pre-existing pathology. The fusion may be partly degenerative. Verify wages with tax returns, not a letter. Confirm the motorcycle's own coverage and any UIM interplay.
- Do not let the 10-day date drive the decision. A short deadline is a common pressure tactic; bad faith is not established by a missed artificial deadline, but it is established by an unreasonable rejection of a policy-limits demand within limits. Time-limit demands must be evaluated quickly and the evaluation documented - that record is the carrier's defense.
2. What does the duty to settle require of you, the carrier, and the insured here - and how do you document it?
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The carrier controls the defense and owes the insured a duty to act in good faith regarding settlement, including her excess exposure.
- Communicate with Ms. Kim in writing. Tell her the value is above her limits, that exposure to a personal judgment exists, and that she may retain personal counsel at her own expense. This notice is itself a defense to a later bad-faith claim.
- Make a reasoned decision fast. If the evaluation exceeds the limit, attempting to settle at or near limits is the appropriate course. If the claimant will not release the insured, consider a tender with a covenant not to execute, or an interpleader or declaratory judgment action to resolve competing claims to the limits.
- Watch the second sentence of her question. Answer it honestly: yes, she can hire her own lawyer, and she should understand that the carrier's lawyer represents her but is selected and paid by the carrier.
- Document everything. Claim notes showing the evaluation methodology, the liability analysis, the damage range, the demand response, and the timing. An adverse verdict later will be litigated on whether the carrier's conduct was reasonable, not whether it was right.
- Respond to opposing counsel in writing - state the position, request the records you still need, and do not simply let the deadline expire in silence.
3. How do the ERISA lien and the prior back injury affect what you can actually pay and how you structure the settlement?
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Both reduce what the claimant nets and both must be resolved before money moves.
- ERISA reimbursement. The health plan claims $41,000 and, in a self-funded plan, may have a right to reimbursement from the tort recovery. Ask for the plan document and summary plan description, confirm the plan paid the treatment, and negotiate a compromise reduction for procurement costs and attorney fees - carriers routinely obtain 20–40% reductions. Get the plan's release and lien waiver in writing at closing.
- Medicare and Medicaid check. A 41-year-old may also be on Medicare through disability; run the query before settlement, because the carrier may have reporting obligations under Section 111 and a conditional-payment problem.
- Apportionment. The 2019 injury and degenerative findings cut both ways: they can reduce the causal share attributable to the crash, but they also make the claimant look worse to a jury. Obtain a physician's apportionment opinion. If the fusion was clearly accelerated by the crash, the reduction is small; if it was inevitable, a joint-and-several argument still leaves the insured exposed for the full judgment in most states, which pushes toward policy limits.
- Structure and release. Pay the $100,000 in exchange for a full release of Ms. Kim and a dismissal with prejudice, with the lien resolved from the proceeds; confirm the lienholder's acknowledgment in the settlement agreement rather than trusting the claimant's lawyer to pay it.