lawsuit below. Specifically, will the taxpayer need to include the lawsuit/settlement amounts below in gross income? Are there any available exclusions? Do the available exclusions apply? Sally Smith was involved in an auto accident with Jerry Jones in Weld County Colorado. Ms. Smiths vehicle pulled out in front of Mr. Joness motorcycle causing the motorcycle to collide with Ms. Smiths vehicle. Due to the accident, Mr. Jones was seriously injured and spent several weeks in the hospital with medical bills exceeding $500,000. At the time of the accident, Ms. Smith was insured by Sun Insurance Mutual Insurance Company (hereinafter referred to as Sun Insurance) with policy limits of $100,000 per person and $300,000 per accident. A review by Sun Insurance led to the determination by Sun Insurance that Ms. Smiths liability for the auto accident was both clear and aggravated. Sometime after the accident, Mr. Joness attorneys contacted Sun Insurance to request an affidavit of no additional insurance and also provided Sun Insurance with a proposed form of the affidavit in August 2015 as well. In addition, Mr. Joness attorneys requested that Sun Insurance pay the applicable policy limits of $100,000 to Mr. Jones. Although Sun Insurance signed and executed the affidavit, they never actually sent the executed affidavit until November 9, 2015. Due to Sun Insurance s failure to comply with the aforementioned request, Mr. Jones rejected Ms. Smiths tender of the policy limits and pursued litigation. A suit was filed on behalf of Mr. Jones on September 11, 2015 in the Case Jones v. Smith (hereinafter referred to as the Jones litigation). Damages totaling $1,652,207 were awarded to Mr. Jones as a result of this litigation. Ms. Smith then filed a complaint against Sun Insurance under the following causes of action: 1) Breach of Contract, 2) Bad Faith Breach of Contract, and 3) violation of C.R.S. 10-3-1115. Ms. Smith alleged that Sun Insurance s actions before the Jones litigation caused a rejection of Ms. Smiths tender of the policy limits and the resulting litigation. Ms. Smith is currently seeking the following damages: 1) Payment of the remaining balance of the judgment from the Jones litigation less punitive damages and partial payments by Sun Insurance. 2) Damages to Ms. Smith for her credit and reputation. 3) Non-economic damages for emotional distress, anguish, and inconvenience 4) Statutory Damages pursuant to C.R.S. 10-3-1115 and 1116 (statute designed to dissuade insurance companies from arbitrarily denying claims).