When an insurance claim is filed, particularly in situations involving personal injury or significant property damage, one of the most important aspects for both plaintiffs and defendants is determining the policy limits of the insurance coverage in question.
A thorough policy limit investigation is crucial for understanding the potential financial exposure of all parties involved and strategizing for the next steps in the claims process. Whether you are a plaintiff’s attorney, a defendant’s representative or an insurance claims professional, understanding how to conduct a comprehensive policy limit investigation can greatly influence the outcome of the case.
Understanding the Importance of Policy Limits
Policy limits are the maximum amounts an insurance company will pay out under a particular insurance policy, either for a single claim or throughout a policy period. In personal injury, auto accidents, or property damage cases, knowing these limits is essential for assessing the potential for recovery, making settlement decisions, and gauging the strategy for litigation. In some cases, insurance policy limits can even dictate whether or not a case goes to trial or settles before a verdict.
An investigation into policy limits goes beyond simply obtaining the policy number or the insured’s details. A thorough policy limit investigation involves examining the policy’s nuances, understanding the potential for additional coverage (such as excess or umbrella policies), and verifying the coverage limits under various scenarios.
Step-by-Step Guide to Conducting a Thorough Policy Limit Investigation
1. Identify the Insured Party and Relevant Insurance Policies
The first step in investigating an insurance policy’s limits is identifying the insured party and determining which insurance policies may apply to the case. Start by obtaining the name of the individual or entity being insured, as well as any relevant details about their insurance coverage. This could include personal auto policies, homeowners’ insurance, commercial insurance, or even business liability coverage.
If you are dealing with an accident or injury involving multiple parties, it may be necessary to identify all parties involved and determine which of them has relevant insurance coverage. Investigate whether the insured party holds multiple policies, including personal, commercial, or umbrella policies. For example, a business owner might have both general liability and professional liability coverage, each with different limits.
2. Request a Copy of the Insurance Policy
Once you have identified the insured party and the potentially relevant policies, the next step is to request a copy of the insurance policy. If you are an attorney or claims adjuster, you can send a formal request to the insurer or the insured to provide a copy of the policy. This document will contain the actual policy limits and can provide key insights into the structure of the coverage.
While obtaining the entire policy can be important, at the very least, request the declaration page, which summarizes key information about the policy, including:
- The type of coverage (e.g., liability, property damage, bodily injury)
- The amount of coverage limits
- Any exclusions or endorsements that may apply to the policy
A close look at the declarations page will help clarify the maximum payout under the policy for different types of claims.
3. Examine the Policy Limits
Once you have the policy, carefully examine the coverage limits. This will usually be spelled out clearly under each type of coverage, such as bodily injury or property damage, depending on the type of insurance policy.
- Single Limit vs. Split Limit: Some policies have a single-limit amount, which represents the total coverage available for both bodily injury and property damage. Others may have a split-limit structure, where the coverage is divided into separate amounts for bodily injury and property damage. It’s essential to know which structure is in place for the specific policy you are investigating.
- Per Claim vs. Aggregate Limits: For many policies, there are both per-claim limits and aggregate limits. The per-claim limit is the maximum amount that will be paid for any single claim. The aggregate limit is the total amount that the policy will cover over a policy period (often one year). Understanding these limits is vital, as they can impact how much the insurer is liable for in the case of multiple claims.
- Exclusions and Endorsements: In addition to the limits, scrutinize any exclusions or endorsements listed in the policy. These can significantly impact the insurer’s liability. For example, a policy may exclude certain types of accidents or injuries from coverage, such as those occurring while the insured party is engaged in illegal activities.
Investigate Potential Additional Coverage
While the primary policy limits are the most obvious consideration, many insurance policies contain additional coverage options that may increase the available payout. These can include:
- Umbrella Policies: Umbrella insurance provides additional coverage over and above the primary policy limits. This can be crucial in cases where the primary policy’s limits are exhausted. An umbrella policy often provides high-limit coverage, especially in severe accident or injury cases.
- Excess Liability Coverage: Excess liability coverage functions similarly to umbrella insurance but is typically more specific. It may only extend coverage for certain types of claims or specific situations, such as auto accidents or medical malpractice. Determining the existence of such policies may open doors to additional sources of recovery.
- Other Policies: In some cases, the insured may have additional policies that could apply to the claim at hand. This includes worker’s compensation policies, health insurance coverage, or additional liability policies that may be overlooked in the initial investigation.
Verify the Policy’s Effective Dates
Insurance policies are bound by specific timeframes, including the policy’s effective and expiration dates. It is crucial to verify that the policy was in effect at the time of the accident or loss in question. If there is any uncertainty about the policy’s validity or lapse, investigate whether a gap could impact the insurer’s responsibility.
In some cases, an insurer may attempt to argue that the policy was not active during the relevant period. Therefore, confirming the policy’s effective date and ensuring no gaps exist can be crucial for determining the true policy limits.
Conclusion
Conducting a thorough policy limit investigation is a critical step in evaluating a claim’s potential value, whether for settlement negotiations or litigation. By carefully identifying the insured, examining the policy terms, investigating potential additional coverage, and verifying the policy’s validity, you can gain a comprehensive understanding of the available coverage and ensure that you are adequately prepared for the next steps in the claims process.
