Although your question is fairly simple, the answer isn't. You need to go see a lawyer. First, the "limit" that the insurer is probably referring to is the bodily injury limits. An insurer generally can't be forced to pay more than the limits of the policy. It may be, however, that there is other coverage in the same policy, like medical payments coverage, which can be accessed to cover more of the bills. While you can sue the friend, the issue is whether the friend has the money to pay a judgment. Most people don't, and judgments like this simply impossible to collect. What can be done is negotiating with the medical bill providers to persuade them to take less so that all the money doesn't go to the bills and your family member gets to keep some.
This is just an outline-- please find a good lawyer in your area and give him/her a call right away.
Your friend should contact an attorney at once. Attorneys like myself who handle these types of claims do not charge to discuss matters. There is a good chance I would be able to handle this without her owing any of the $150K and not suing her friend. I would need more facts and would need to discuss with her.
Sign up to receive a 3-part series of useful information and advice about personal injury law.