Expert: Ron Cercone - 1/18/2011

Question
I am awaiting my auto insurance's decision on an UIM claim that I am involved in and I have a very good suspision that they are going to offer me alot less than I feel my claim is worth. If they offer less, is this a case of bad faith? and if so what am I entitled to?
The facts of the incident are as follows:
I was very badly injured in an auto accident where I had 3 ruptured disks in my thorasic spine. I underwent major back surgery...two fusions and a discectomy. Have been without work for about a year, and have clearly exceeded my policy limits with my medical bills, lost wages and pain and suffering. (Medical bills $180,000, Lost wages $140,000, Prescription meds $800.00...and I am still being treated, Not to mention any pain and suffering). It has really taken a toll on me mentally and physically. I have drained any savings that I had trying to stay ahead of my doctor bills.
My underinsured policy limit is $500,000.  My question is this: who determines wether the amount that my insurance company offers me is too low and considered to be in bad faith? I expect the policy limits. I feel, and correct me if I'm wrong, that with my lost wages, medical bills, and pain & suffering I clearly exceed my policy limit. They seem to be dragging their feet on it a bit, so I'm wondering, if they offer me less than the policy limits do I have a case for bad faith?
One other question, will I have to pay taxes only on the portion that is stated as lost income? or does our wonderful government tax the entire amount?
I would really like to thank all of you experts for the time that you devote to answer all of our questions.

Thanks again so much for your help!
-J-

Answer
I would agree that that they probably owe the policy limits of 500k. As to the bad faith part if they pay less, you should consult a lawyer for a free opinion. If they agree, then they would take your case on contingency. Some policies and states require the insurer to pay for a lawyer to represent you against your own company in UIM claims. Check on this. I don't know about taxes on injury claims. Check with the IRS.