Personal Auto PolicyQuestion 375 of 474
An insured with a $100,000 per-person bodily injury limit is sued, a $100,000 judgment is entered, and the insurer spent $30,000 defending the case. In total the insurer pays:
a.$130,000, because defense costs are paid on top of the limit
b.$100,000, with the insured billed for the defense cost
c.$70,000, because defense spending reduces what is paid
d.$100,000, since the defense cost is taken from the limit itself
Explanation
Defense is a separate promise, not a payment of damages, so the cost of defending sits outside the limit of liability: $100,000 of damages plus $30,000 of defense equals $130,000 out of the insurer's pocket. The answer that nets defense out of the limit would leave the claimant $30,000 short of the judgment. Nothing is billed back to the insured, and Part A carries no deductible.
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