Time-Limited Demand with Multiple Claimants and Inadequate Limits
On a clear afternoon in Nashua, NH, an insured driver, Ms. Patel, runs a red light and strikes a sedan carrying three coworkers. Liability is not disputed. Patel has a personal auto policy with limits of $100,000 per person/$300,000 per accident and a $500 deductible. Claimant A has $48,000 in medical bills, $12,000 in lost wages, and a torn rotator cuff with surgery recommended; her attorney sends a 30-day time-limited demand for the $100,000 per-person limit and a release. Claimant B has a traumatic brain injury with projected lifetime care exceeding $500,000. Claimant C has soft-tissue injuries and $9,000 in medical bills. The 30-day period has 11 days left. The insured has $180,000 in home equity and calls the adjuster daily, asking the insurer to 'just pay A before B takes everything.' The insurer has not yet received B's medical records. The claims manager asks you to recommend a response.
1. What is the adjuster's immediate obligation in responding to Claimant A's time-limited demand?
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The adjuster must acknowledge the demand in writing, calendar the deadline, and avoid treating silence as a rejection. The demand cannot be accepted blindly because B has a catastrophic claim that may exceed the per-person limit, and accepting A's demand would consume one-third of the per-accident limit before B's records are reviewed. At the same time, ignoring a reasonable demand within limits can expose Patel to an excess judgment and support a bad-faith claim. The correct step is to request a short extension, explain that the carrier is investigating all claims and the available limits, and ask for A's updated medical records, lien information, and a release that fully protects Patel. The adjuster should also send Patel a written explanation of the competing claims and the risk of an excess verdict, and should consider retaining defense counsel. If A will not extend, the carrier must make a documented, reasoned decision: accept, counter, or decline, based on damages and the risk to the insured, not on the deadline alone.
2. How should the per-person and per-accident limits apply if all three claims are resolved? Show a possible allocation and explain the risk.
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Each claimant is capped at $100,000, and the total for all bodily-injury claims cannot exceed $300,000. A plausible allocation is A $100,000, B $100,000, and C $9,000, for $209,000 total. B's damages exceed $500,000, but B cannot collect more than the $100,000 per-person limit from this policy; the excess is a personal exposure for Patel. The remaining per-accident limit does not let B break the per-person cap, and C's small claim does not justify paying C more than the actual damages. The risk is timing: if the carrier pays A first, B may later argue that the carrier favored a smaller claim and exposed Patel to excess liability on the catastrophic claim. Conversely, if the carrier pays B first, A may argue that her demand was ignored. The adjuster should evaluate all claims together, document the comparative severity and liability, and consider an interpleader or global mediation so the court or all claimants can allocate the limits in one proceeding.
3. What claim file documentation and communication steps should the adjuster complete before the 30-day deadline?
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The file should contain the date and time the demand was received, the exact deadline, the demand amount, the release terms, and every response. The adjuster should obtain A's complete medical records, operative report, wage-loss documentation, and lien search; confirm whether A's release covers all claims and all insureds; and evaluate whether $100,000 is reasonable compared with A's specials and future care. The adjuster should also request B's records and C's bills and document why the carrier can or cannot evaluate the limits in 11 days. Communications with Patel should explain the excess exposure, the competing claims, and the need for personal counsel, and should be confirmed in writing. Any decision to pay or not pay must state the reasoning, the evidence reviewed, and the effect on the remaining limits. The adjuster should also consider a written offer of the available limits into court or an interpleader, and should preserve all emails and notes because the file may be examined in a bad-faith action or a New Hampshire Insurance Department inquiry.