I was the at-fault driver in a multi-car accident in 2015. One of the injured parties sued, claiming the accident had aggravated a pre-existing health condition and left her totally disabled/unable to work. She hired an "ambulance chaser" type of lawyer who, luckily for me, was pretty bad at his job. The case drug out through early 2018, when we finally went to trial (after multiple settlement offers). The period leading up to the trial was INCREDIBLY stressful, because while we had a solid policy (500k limit, similar to your parents), the ambulance chaser was bandying about numbers like a 2 million ask, but willing to settle for 1 million.
For better or worse, I elected to be represented by the insurance company's contracted attorney. I figured they would not want to pay out a full $500k, so my own liability would hopefully be sufficiently limited at no extra cost to me. I also googled the plaintiff quite a bit and found major holes in her story, which my lawyer also found.
Once we got into jury selection, my fears started to dissipate. While I was at fault, the place the collision occurred was a well-known accident prone area on I5 -- a bottleneck on a bridge where a lane joined just before a small rise that severely limited visibility. One of the questions my lawyer had in the voir dir was "Have you ever witnessed a collision at [location]?" which led to a STREAM of comments confirming how difficult that area was to navigate, including one person whose office looked out at precisely that location on the bridge who commented that they saw accidents/police and fire response there almost daily. The opposing attorney kicked them from the jury pool, but everybody in the room heard/registered that comment.
I did NOT deny liability. I was going too fast for the conditions and was unable to stop in time and rear-ended the car in front of me, which then hit the car in front of it. I was NOT playing around with my cell phone (an argument the opposing attorney tried unsuccessfully to make -- bonus points for having a cheap, no data cell plan at the time!
IIRC insurance company offered to settle for 50k right before the trial. As things were going badly for the other side, they dropped that to 30k. In the end the jury was out for just a couple of hours, and awarded just over the 30k that my lawyer said in closing they felt was justified. I think the final claim by the opposing side had been for right around 1 million. They paid a shit ton for fancy "experts" who really made a poor case, especially since they tried to hide evidence of prior treatment for the same injuries they claimed the accident caused.
If I could go back and do it all again, I think I probably would have pushed harder for the insurance company to settle at a higher number, say 100k. The trial drug out for OVER A WEEK (again, because the opposing counsel was so bad and wasted time on things like character witnesses for his client who were totally unnecessary (and probably lying)). Everyone was annoyed, but it was also very costly for both sides. On my side alone there were three highly-paid people in the courtroom every day (attorney, paralegal, and insurance adjuster), plus the adjuster's manager a couple of days. Not to mention all the time spent on discovery (a lot in this case because the opposing party kept trying to hide medical records) and depositions. It probably would have cost the insurance company less to settle higher. But I guess the court-related costs probably figure into their balance sheet in some advantageous way.
In sum, I guess I would say that with a 500k policy limit I would be reassured that the initial letter is asking for only 100k, and that it is highly likely that the insurance company will settle and your inlaws won't be liable for anything. But if they are really concerned they should talk with both the insurance company appointed counsel and possibly a third-party lawyer of their own choosing. They will probably want to look at someone that regularly DEFENDS against personal injury lawsuits, though someone who regularly brings them might have inside info about common strategies/tactics they might see from both the plaintiff's lawyer and insurance company counsel.
If you want help finding somebody to possibly represent them there is a guy -- Peter Tragos -- who has a great youtube channel called The Lawyer You Know who is pretty widely connected in personal injury (which he practices in Florida) who might be willing/able to give you some names in your area.
