Liability Insurance Guide - Coverage And Limits
Under a policy written for basic limits only, $10,000 will probably be available for all persons injured in a one occurrence. A policy states this amount is at the mercy of the above provision respecting each individual, the total limit with the company's liability for many such damages arising out of bodily injury sustained by a couple of persons due to any one occurrence.
Suppose our insured, in a single occurrence, injures three persons-A, B, and C, who obtain judgments the following: A $ 6,000 Limits of Liability (Bodily In fury- "each occurrence"), B 4,000, C 2,000, Total damages $12,000
"Subject to the above provision respecting each person" signifies that the insurer will pay no more than $5,000 on A's judgment. The judgment for B is the basic limit per person, because they are that for C. However, despite the decrease in A's payment to $5,000, the whole would come to $11,000, and also this is $1,000 greater than the insurer's limit of liability per occurrence. Therefore, his final payment will never be more than $10,000 in most. The insured will need to make up the over-all difference of $2,000 away from his own pocket. If he no longer can do this, a question inevitably arises regarding which of the three plaintiff's-A, B, or C-will suffer the deficiency.
When several plaintiffs exist which is feared that neither the insured's assets nor the insurance policy limits is going to be adequate to reimburse all completely, it can readily be imagined that there will be a race to file for suits and push them right through to a successful conclusion "in order to have first whack on the policy proceeds." To discourage this unseemly competition, and in the interests of greater equity, some states give a distribution of the policy limits among the several plaintiff's in proportion to the amount of their respective judgments. Which is, in the example above, A would get $5,000; B, $3,333; and C, $1,667. But this is feasible only once all judgments are rendered inside a reasonably short space of time. It would obviously be unfair to plaintiff A, and a hardship on the insurer, to withhold payment of A's judgment to have an undue time pending the result of suits by B and C, not forgetting the possible institution of suits by and others who may have been involved. Being a practical matter, therefore, the insurer is normally free to choose the principle of first come, first served, and, assuming it acts in good faith, the fact the policy limits are exhausted ahead of the last plaintiff has been paid will never be held unfair or inequitable.
As regards property damage liability, under a basic limits contract, $5,000 will be the total limit with the company's liability for all damages arising out of injury to or destruction of property of 1 or more persons or organizations, like the loss of use thereof, as the result of any one occurrence.
Suppose our insured hits automobile 1 a glancing blow, rebounds, travels unmanageable some further distance down the road and then sideswipes automobiles 2 and three before coming to a halt. There's not available $5,000 for each and every automobile damaged but only $5,000 for those automobiles damaged. Thus, if each car were damaged for the extent of $2,000, the insurer would pay not $6,000 but only $5,000. This assumes, obviously, that there was only one occurrence as the limit of $5,000 applies to all property damaged in "any one occurrence." How is it possible that the collision with automobiles 2 and three constituted a separate occurrence from that of the impact with automobile 1 ? Was there one occurence here or two separate and distinct occurrences ? It's not always easy to define where one incident ends and another begins, however in this example the sequence of events could possibly be deemed to become a single occurrence.
Much like the coverage provided for bodily injury, the limit of liability for property damage includes not merely the actual expenses for your repair or replacement of the damaged automobile but also expenses incurred as a result of "the loss of use thereof." For instance, if our insured damaged a delivery truck so that it was under repairs for a week, where it was essential for the claimant to hire a substitute delivery truck for around $50 a day, the plaintiff would claim, and the insurer would pay, the expense of hire besides the cost of repairs. In no event will be total payment exceed the sum of $5,000.