I'm sure a claim was made on the insurance company, which was denied. However, even if the insurance company denied her claim, the aunt has no standing to sue the insurance company, which essentially means the insurance company has no obligations towards her; their obligations are only towards their insured, the nephew (and his family). Because she has no standing to sue the insurance company, she has to sue a covered person, the nephew, and said lawsuit triggers the insurance company's responsibility to (1) defend the insured and, if they lose the lawsuit, to (2) indemnify the insured up to the policy limits.
Once sued, the father notified the insurance company of the lawsuit, and the insurance company paid the boy's attorney(s).
Had the aunt prevailed, then the insurance company would have paid up to the policy limits, regardless of the family's - well, really the son's - ability to pay.