Liability insurance and policy limit demand options.
Question Details: A business owner caused water damage to a school. The business owner received a demand from the school for $3,800,000 in alleged damages. The business owner has $3,000,000 in liability insurance. Is it possible for the business owner to demand his insurance company settle the claim for policy limits, if the plaintiff would be willing to accept $3,000,000 as settlement?
Insurance Law Law Answers
The insurance company is liable to pay for up to $3mm. However, if they believe that either there is a doubt about liablility or about the amount of damages, they are not required to automatically pay that amount. The insurer can make the case go to court to have the liabilty (legal fault, or obligation to pay) and/or the amount of damage proven. At any point, they may *choose* to settle if they think that at the end of the day they would likely have to pay that much anyway; but they are not required to simply accept the school's demand as establishing the obligation to pay or the amount.
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