There is often a dispute between what a client thought they had in coverage and what the client's policy actually covers. Anyone can sue anyone else for anything in the U.S., but that doesn't mean they will win their case. In this situation, the claims agent can stand behind the policy that you bought and the coverage explained in the policy booklet to bolster his or her argument that if you had read your policy coverage explanation, you would have known exactly what the policy covered. That doesn't mean that your agent may have misled you or misspoken or even sold you the wrong type of coverage by mistake. However, it will be difficult to win such a case as yours. Since the coverage you were actually given did not cover what you owed on your bike, the insurance company only has to pay you the market value of your bike on the day it was damaged and they have the right to then sell the bike for salvage. With the money you receive, you are meant to be placed in the same position you were before, and able to buy the same year bike with the same mileage. The trouble with that is, as you have found out, is that you still owe money on the bike that was damaged. This is where the typical insurance policy simply doesn't cover all of a person's loss, especially when the value of vehicles depreciate. To be fully covered, a person has to purchase the type of insurance that, in addition to providing liability coverage for accidents, covers the amount of the vehicle loan and not just what the vehicle is worth. Car dealers will often sell this type of policy and then, unfortunately, sometimes people think they have bought liability insurance when the only thing they've covered is the payoff on their vehicle.
Before you sue her try working with her to have State Farm pay. Insurance companies often deny claims initially but later cover them. Work with her and see what happens. If they do not pay ask your agent to pay. If she does not, then you can file a small claims suit.
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