What Happens When My Car Accident Settlements Exceed The Policy Limits?

Laws in the United States mandate that motorists carry a certain amount of auto liability insurance. Regrettably, these minimum requirements do not always provide enough coverage for your damages, especially in car wrecks causing severe or catastrophic injuries.

While this may lead you to assume that many car accident claims settle for more than the policy limits in place, this seldom actually happens.

What’s In This Guide:

    Types of Car Accident Injuries That Can Exceed Insurance Policy Limits

    The injuries most commonly associated with auto accident settlements are as follows:

    1. Spinal cord injuries to the cervical spine and lumbar region, including spine surgeries and herniated discs.

    2. TBIs (traumatic brain injuries).

    3. Catastrophic injuries.

    How Do Insurance Policy Limits Work?

    Auto liability insurance always comes with a specific policy limit. This limit refers to the maximum dollar value an insurance company will pay on behalf of the insured for damages caused in an accident.

    How, then, can an auto accident claim exceed those policy limits?

    As an example, if you were involved in a car wreck and the insurance policy of the at-fault motorist has a policy limit of $50,000 with respect to bodily injury, this is the maximum amount the insurer must legally pay you to cover the damages you sustain. This limit still applies even if your lost earnings, medical bills, and other non-economic damages like pain and suffering exceed this amount.

    What can you do to collect these excess damages, then?

    How Can You Collect the Full Value of a Car Accident Claim?

    While it is possible to collect damages totaling more than the at-fault driver’s policy limits, this is unlikely to be successful. To maximize your chances, retain an experienced personal injury lawyer to guide you through the process.

    You can collect damages in excess of insurance policy limit in the following ways:

    • Filing suit against multiple at-fault parties
    • Collecting under an umbrella policy
    • Collecting from the at-fault driver
    • Collecting damages under the Stowers doctrine or similar if an insurer acts in bad faith

    If you have UIM (uninsured motorist coverage) on your policy, you can collect from your insurance company.

    Multiple at-fault parties

    Some accidents involve more than one party that could be considered responsible, both legally and financially. You could be involved in an auto accident with an at-fault driver who was driving on behalf of their employer. This gives you the option of suing the employer per respondeat superior, a legal doctrine that states employers can be held responsible for negligent acts committed by their employees in pursuit of business.

    When other drivers are involved in an accident, you can file a claim against each party. All parties involved will be held responsible for a percentage of your medical costs according to the percentage of fault legally assigned to each party.

    If you can prove that several defendants – business operating a joint venture, for instance – were acting in concert, those defendants acting together can all be held accountable for the losses you incur.

    Umbrella policy

    Even if your case only involves a single at-fault party, you may still find there is more than one insurance company or insurance policy involved when trying to recover excess damages.

    An umbrella policy is a type of insurance designed to add extra liability coverage beyond the primary insurance policy limits.

    If an at-fault party in an auto accident faces liability for damages exceeding the specified limits of the underlying policy, the umbrella policy kicks in. Umbrella policies are popular among those with assets they want to protect by ensuring they have adequate insurance coverage in place.

    Suing beyond policy limits

    Most cases do not involve umbrella policies or multiple defendants who could contribute to a settlement.

    If you find yourself in this situation, and if your damages and losses breach policy limits, your only remaining option is to pursue the defendant and try to collect personally.

    Many defendants will have no assets worthy of collecting. Alternatively, they may have assets exempt from collection.

    If you can locate assets like cash, property, stock shares, or vehicles, your attorney can initiate the process of recovering those assets from the at-fault party.

    In reality, most defendants who are poorly insured do not have any assets of value.

    Allegations of bad faith

    You may discover that the insurance company has acted negligently toward their insured and exposed them to a substantial judgment. If so, this is considered acting in bad faith.

    If you are prepared to settle your claim against the at-fault motorist for a sum within the limits of their insurance policy and the motorist’s insurer then fails to deliver, you may then secure a jury verdict exceeding those policy limits. If this occurs, the insurance company can be held liable for the full amount of damages.

    If, for example, your case is weak and your settlement demands are unreasonable, it is unlikely that the insurance company will be found negligent for refusing to settle. Similarly, if your demand for settlement provides insufficient clarity concerning the scope and amount of losses, or if there is not enough supporting documentation about the allegations of negligence, the insurance company will not be found to be acting in bad faith.

    The intricacies of the claims process mean you will have the most chance of a successful and reasonable settlement if you retain a car accident injury attorney. The contingency nature of legal fees for personal accident injuries means you’ll pay nothing until you settle your case.

    A good attorney can help you to get fair and reasonable compensation, even if this amount exceeds insurance policy limits.

    [LEARN MORE]: Can I Deduct Attorney Fees From a Car Settlement?

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