HELP! CAR ACCIDENT LAW SUIT

Sorry I can not input Chinese here.

I had a car accident about one and half years ago. It was my fault. My car only had some scratches from the accident. The damage was estimated to be around $800. My insurance company offered $1000 to the other side for her damage. The other side refused to take the compensation and started to sue me and claimed she had a body injury of $100,000 (which was the upper limit of my insurance coverage).

The lawyer of my insurance company called me today and told me that for my protection I should instruct her to write a letter to my insurance company and ask my insurance company to pay $100,000 to the other side. The lawyer said that if my insurance company does not pay as I instructed them to do, then I will be free of any obligation to pay anything if the court judgement is over $100,000.

I do not know if I should trust my insurance company's lawyer or not. I don't know why she wants to help me and tell me this. From my understanding, she works for the insurance company and should protect their insterest.

I am really frustrated and worried. I am only a student and don't know how I am going to pay if the judgement is over $100,000. The law suit seems so ridiculous. A small accident caused so much trouble for me. I am so "DAO MEI".

Can I trust my insurance company's lawyer and ask her to write the letter? Anyone with the knowledge, please give me some advice!!! Your help is really appreciated!!!