At-fault driver's insurer approved everything then pulled the rug out — is this normal??

This is a textbook adjuster move — get you to rack up expenses while approval feels "verbal and real," then suddenly introduce the policy-limits conversation once you're already committed. They're managing their exposure, not helping you. Do not return that rental until you have something in writing explaining exactly why authorization is being revoked. Paper trail everything from this point forward.

I used to work claims and I'll be honest — what you're describing happens more than it should. When a file gets transferred between reps, commitments made by the first rep sometimes get quietly walked back. It's not always malicious but it is messy and it absolutely lands unfairly on the claimant. The demand letter request itself isn't unusual — that's a real part of the process — but they should have told you upfront that coverage might be an issue before you started spending. Keep every voicemail, every email, every name and date of every phone call.

A demand letter is a legit step in the claims process, but the timing here is sus. Normally you'd be told about potential coverage gaps before you're out of pocket. A demand letter basically lays out your total damages — repair bills, rental costs, any other losses — and formally asks for reimbursement. You can write one yourself but a lot of people have an attorney draft it because it signals you're serious. Either way, include everything: contractor invoices, rental receipts, photos, the camera footage reference. Don't leave money on the table by being vague.

Almost identical thing happened to me after someone backed into my garage. Got verbal go-aheads, spent money, then suddenly heard the words "policy limits" for the first time. I ended up filing through my own insurance (I had uninsured motorist property damage coverage) and letting them subrogate against the at-fault carrier. It was slower but I actually got paid. Worth checking what coverage you have on your own policy.

Stop calling them and start emailing. Every single interaction needs to be in writing from here on out. If you have to call, follow up that call immediately with an email: "Per our conversation today with [rep name], I was told X." This protects you if they try to claim something different later.

This sounds so stressful, I'm sorry. The fact that they encouraged you to spend money and are NOW bringing up coverage limits feels genuinely wrong. Please don't just let this go — at minimum talk to someone who knows this stuff before you accept whatever they're offering.

Quick question — did you get the original authorization in writing, or was it all phone calls? That detail matters a lot here. If it was only verbal it's going to be harder to hold them to it, though not impossible. Also, do you know approximately what the at-fault driver's liability limits are? That context would change the advice pretty significantly.