Policy Limits Demand Acknowledgment Letter

Purpose

The Policy Limits Demand Acknowledgment letter is used to formally acknowledge receipt of a time-limited demand for the policy limits ({{demand_amount}}). It confirms that the carrier is evaluating the demand and the underlying claim.

When to Send

This letter must be sent immediately upon receipt of a policy limits demand, especially those with a specific expiration date. Failure to acknowledge and timely respond to such demands can lead to "bad faith" exposure.

Required Components

1. Demand Receipt

Confirm receipt of the demand for the policy limits ({{demand_amount}}) received on behalf of the claimant regarding claim {{claim_number}}.

2. Policy Information (Limited)

Acknowledge the applicable policy ({{policy_number}}) and, if appropriate and required by jurisdiction, disclose the applicable limits: ${{policy_limit_per_person}} per person / ${{policy_limit_per_accident}} per accident.

3. Ongoing Investigation

State that the carrier is currently investigating the liability and damages associated with the claim on {{date_of_loss}} to determine if a settlement within the policy limits is warranted.

4. Request for Documentation

If necessary, identify any outstanding information or documentation (e.g., medical records, wage loss verification) required to complete the evaluation of the demand.

5. Commitment to Respond

Provide a timeframe for when the carrier expects to provide a formal response to the demand, ensuring it aligns with any deadlines set in the demand or by state law.

Jurisdiction Notes

Universal

Handling policy limits demands is a high-sensitivity area. Many states have specific statutes or case law (e.g., Stowers in Texas, Holt in Georgia) that govern how carriers must respond to avoid "opening" the policy limits.

Adjuster Guidance

• Notify management and/or legal counsel immediately upon receipt of a policy

limits demand.

• Document all efforts to obtain necessary information to evaluate the demand.
• Keep the insured ({{named_insured}}) informed of the demand and the potential

for an over-limits judgment if the demand is not met.

• Ensure the response is sent via a method that provides proof of delivery.