Policy Limits, Coverage, and Settlement Mechanics

Coverage work and injury valuation answer different questions. Claim valuation estimates what the evidence and law could support. Coverage analysis asks whether a particular policy may respond and what amount could be available under its terms. Keep those questions separate in notes, negotiations and client advice.

The Texas injury claim value and litigation hub has the bigger picture. For the numbers side, see how to build a defensible settlement valuation model. For everything else, start with how Texas injury claims are valued and litigated.

Identify each policy and insured before relying on a limit

Pull the declarations page. Then get the whole policy, endorsements and all.

Read the declarations against the rest of the policy. Who is named as an insured, and does an endorsement add anyone? Check the policy period and the vehicles or operations to which coverage applies. A per-person limit, a per-occurrence limit and an aggregate limit answer different questions; record each that applies, along with the deductible or self-insured retention. Find out whether defense costs consume any of the available limits.

An insurance card can point you toward coverage. So can a certificate, an adjuster’s statement or an online listing. None of them replaces the policy language.

List every potentially responsible person or organization and ask which policy could cover that party for this event. Depending on the facts, that may include a driver’s auto policy, a vehicle owner, an employer, a commercial carrier, a permissive user, or an umbrella or excess policy. A policy’s existence does not establish that this particular person, activity, or injury is covered. Check exclusions, conditions and facts that may determine insured status. Treat a possible layer as an open question until the supporting policy or confirmation is obtained.

First-party coverage has a different role from a liability insurer’s coverage for its insured. Uninsured or underinsured motorist coverage, medical payments coverage, and health benefits may have separate terms, notice requirements, offsets, or reimbursement issues. Identify them separately; do not add them to a liability limit as if they were one pool of money.

Separate the claim amount from what may be collectible

Don’t work from one assumed total. A coverage chart works better, with one row for each policy. Each row lists the insured, the claim, the limits, possible exclusions, and the deductible. It also shows other known claimants, how defense costs are handled, any excess layer, and the open questions.

Keep verified facts apart from estimates. When coverage is unknown, write “unknown.” Don’t assume assets or another policy will fill the gap.

For example, a hypothetical $1 million claim with $100,000 in known limits does not prove that the remaining $900,000 is collectible or uncollectible. The analysis may turn on another policy, an excess layer, coverage defenses, other claimants, or assets—but each is a separate factual issue to investigate. A potential $1 million verdict also does not itself create $1 million in insurance coverage.

Understand what a limits demand asks the insurer to do

A settlement offer should make the trade easy to understand. Name the claimant and the insured or insureds. State the amount. Spell out which claims and which people get released, and any conditions on acceptance.

Also say how the insurer should accept, and how payment or tender works.

A response deadline needs a date and a time. It also needs to leave a real opportunity for the insurer to evaluate and accept the proposal. Retain the delivery and receipt records. Before sending the demand, resolve who must sign and how liens will be handled; otherwise, an apparent agreement may leave essential settlement work unresolved.

A letter titled “Stowers demand” isn’t automatically one. According to the Supreme Court of Texas, the claim has to be covered, and the demand has to be within policy limits. It also has to be a demand an ordinary prudent insurer would accept, considering the likelihood and degree of the insured’s potential excess exposure. All of that depends on the facts.

Coverage really is the threshold issue. In Seger v. Yorkshire Insurance Co., the Court rejected the claim because coverage hadn’t been established.

Build the demand around proof and workable terms

Give the insurer the evidence needed to evaluate the demand. A brief account of the incident should lead into the evidence supporting responsibility. Include the relevant medical records and opinions connecting treatment to the event. The package needs to support both liability and damages, rather than asking the amount of the demand to speak for itself.

Then give a clear accounting of past expenses, disputed amounts included. (Here’s more on how to prove past medical expenses in Texas.) Add wage or future-care support where it applies, plus an indexed exhibit list.

Be accurate about gaps and disagreements. A disputed charge isn’t “paid.” A treatment option isn’t certain. A liability theory isn’t an established fact.

Before it goes out, check the demand against the policy information you actually have. Confirm the legal names and the insureds, and who has authority to accept. Recheck the release scope, the amount, the response method and deadline, the signatures and the lien terms.

Send it in a way that leaves a reliable record. Keep the exact package and the proof it was sent. If something material changes, update the file.

Account for other claimants and settlement sequencing

Sometimes several injured people are looking at the same per-occurrence limit. Then you can’t assume the whole amount can be promised to one claimant without weighing the competing claims and the policy.

Find out who the other claimants are. Keep their injuries and demands separate. Ask whether the insurer has pointed to an aggregate limit or proposed an allocation. An offer that can’t be accepted consistently with the policy, or with other claimants’ rights, may not get you the resolution you wanted.

The client still needs a comparison between the offer and the case supported by the evidence. Work out the likely net after fees, costs, and valid reimbursements, and discuss the expense and risks of continuing the litigation. Knowing a policy limit is useful, but it does not decide whether to settle. That decision also requires review of the release, the policy terms, and how the proposed payment would actually be completed.

This is general information about Texas law and insurance, not advice about a particular policy or claim. Reading it does not create an attorney-client relationship. Coverage and settlement options depend on the policy language, facts, applicable law and other claimants.