The Case of the Senior Lady – What Would You Do?

Auto and home insurance

This is the sort of situation people can sometimes find themselves in. Instead of including the resolution, let me ask instead, what would you do?

A 69 year old widow and retired homeowner lives in the suburbs. With no children and her only family back east, she is on her own.

Having owned her home for 17 years, she has some equity built up, so she potentially has a lot at stake. 

Circumstances of Claim

She hires a contractor to fix her driveway. One day he asks her to move her car, and while doing so, she feels a bump. Guess what? He says she ran over his foot. No broken bones are found, but there are still medical bills, including for X-rays and pain medication. 

For the next week or so, he misses work. Then he tries to extort money from her for the accident. He first asks for $10K, then comes down to $3K. She doesn’t pay. 

She becomes worried and calls her insurance company. The woman's automobile policy limit is $100K, and homeowners, $300K. But does one or both apply?  Here’s why it matters:

The unlicensed contractor subsequently claims a heart condition in connection with the supposed accident. He gets a lawyer, who makes a $400K demand and asks for the information about the policy limits. 

The insurance company contends that only the auto policy with the $100,000 limit applies.  But instead of telling that to the claimant, the insurance carrier tells her she is not obligated to reveal limits, so she doesn’t. But this eliminates the chance for the claimant to lower his demand to that amount  for a quick settlement. This would give her the peace of mind she paid for, instead of risking a larger judgment later, which might put her home equity at risk.

On its own, the insurance company has no incentive other than fair dealing to pay out the money sooner; it increase its profits by holding on to its cash. This senior lady doesn't realize she could demand that her insurer affirmatively seek  to negotiate a settlement for the policy limits. And being on a limited income from Social Security payments, she is reticent to consult an attorney instead of just relying on the insurance company. 

What would you do?