In: Accounting
Nancy owns two automobiles: a Honda Civic Ex and a BMW X5 which are insured under separate policies. The Honda has a liability coverage of $200,000, while the BMW has $500,000 liability coverage. One Sunday morning, while driving her mother’s car to church, Nancy loses control of the car and hits a single mother with four children. The woman will never walk or work again and is awarded damages of $1,500,000. How much will Nancy’s insurance pay if the mother has $300,000 liability insurance?
First of all, Nancy does not own her mother's car, so it is not Nancy's insurer that will pay for the liability insurance.
On the other hand, the insurer of the car with whom the accedent has occured would be liale to pay if the terms and conditions mentioned in the policy are met. Further the coverage of her mother's liability insurance is only $300,000 thus remaining amount i.e. $1,200,000 (1,500,000 - 300,000) would have to be personally paid by the owner of the vehicle which is her mother in this case (otherwise than ordered by the court).