A driver has limits 100/300/50 on his personal auto policy. After an accident, insurer paid 80k bodily injury damages and defense costs 40k. What amount did the insurer pay as a result?

• A. 40,000
• B. 80,000
• C. 120,000
• D. 180,000

Answer: (C)

Understanding auto liability limits helps explain this. The notation 100/300/50 means: $100,000 max for bodily injury per person, $300,000 max for bodily injury per accident (all injuries in that crash), and $50,000 max for property damage per accident. Defense costs are paid from the same liability limits, so they reduce the amount available to pay bodily injury damages within that $300,000 per-accident limit. Here, the bodily injury damages total $80,000 and defense costs are $40,000, for a combined $120,000 paid. This sum is within the $300,000 per-accident BI limit (and does not exceed the $100,000 per-person limit since the injury to any one person is $80,000). So the insurer paid $120,000.