Question

Matt has an automobile policy with 50/100/50 policy limits, hits a car with three occupants, and all are hurt. They all sue. The first sues and collects $25,000; the second sues and collects $60,000; and the third sues and collects $37,500. The car Matt hit has $13,500 in damage. The insurance company spends $9,500 on a law firm defending the suit. Ignoring PIP, Med Pay or UM issues, how much is the maximum amount that the company would pay for the loss?

(A) $145,500
(B) $135,500
(C) $123,000
(D) $113,500

Answer 1

The maximum amount the insurance company would pay for the loss in Matt's situation, considering his 50/100/50 policy limits and the damages and costs incurred, is $135,500, which corresponds to option (B).

Step-by-step explanation:

The student's question is related to automobile insurance policy limits and how much the insurance company would pay in the event of a claim. Matt has policy limits of 50/100/50 which translates to $50,000 per person for bodily injury$100,000 per accident for bodily injury$50,000 per accident for property damage IN the scenario given: The first person sues and collects $25,000 which is under the per person limit.The second person sues and collects $60,000; however, the insurance would cover up to $50,000 only due to Matt's per person limit.The third person sues and collects $37,500, which the insurance would cover because the combined total for the second and third person does not exceed the per accident limit ($87,500 < $100,000). Property damage is $13,500 which is under the property damage limit.Legal fees are $9,500 which typically are over and above the policy limits.Hence, the insurance company would pay: $25,000 + $50,000 (capped due to per person limit) + $37,500 + $13,500 + $9,500 (legal fees) = $135,500 as the maximum amount for the loss. Therefore, the correct answer is (B) $135,500.