The Insurance Company's Obligation to Protect Its Insured

The question of the day: Suppose you are in an auto accident and you have a $15,000/$30,000 policy. (Most of you should not, but let's say you do.) You have injured 3 people. Each claim is worth $15,000. The insurance company will not pay more than $30,000. What happens?

Generally, the insurance company will explain to the injured people that they have to share the money. In a case like this, where the injuries are all similar, a good adjuster will offer each person $10,000. That resolves the claim within your policy limits. Some insurance companies will, instead, interplead the money. This means that they give the money to the court and say "We do not know how to divide it. Please divide it for us." All of the parties to the case will be defendants. Each person can then make their case for why they are entitled to more money.

In either circumstance, remember that the insurance company's first obligation is to you - their insured. It is up to them to try to settle the case within your policy limits. They must make reasonable steps to accomplish this. If they do not protect you, you may be able to sue them for bad faith.