Understanding insurance reserves can help settle a claim. A reserve is a pot of money set aside to pay for a specific expense category. Typically, there are separate pots for indemnity, medical and med-legal expenses.
Sometimes a negotiator finds that a claim can be closed for an amount more than remains in the indemnity and medical reserves. However, part of the settlement can be classified as a med-legal expense. By spending the money from the med-legal reserve, settlement can be achieved while staying within current reserve limits.