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What Happens When a Car Accident Claim Exceeds Insurance Limits

Posted on August 17, 2023

When injured victims’ rightful compensation amounts surpass the automobile liability coverage held by at-fault drivers, complexities arise in attempting full recovery.

Determining available insurance assets, evaluating realistic settlement ranges given limits, understanding negligence liability beyond policies, and skillful car accident lawyer negotiation become critical for maximizing compensation from underinsured parties.

In this article, Whit Drake will examine insurance considerations, recovery obstacles, and strategies when an accident claim value well exceeds declared liability policy limits. Learning available options helps victims best protect their financial recovery interests in the stressful aftermath of devastating accidents.

Typical Auto Insurance Limits and Coverages

Understanding the liability aspects of standard auto insurance policies provides context on coverages applicable to accident claims. Bodily injury and property damage liability limits dictate per-person and per-accident payout caps that trigger underinsured issues when exhausted. Savvy drivers carry additional umbrella or excess liability policies to overcome underinsured gaps.

  1. Liability Limits for Bodily Injury and Property Damage: The at-fault driver’s policy will specify dollar amount limits capping payouts per injured claimant and per accident overall for bodily injury and property damage claims. These often start at $25,000/$50,000 but can be $100,000+
  2. Availability of Added Coverages: Umbrella or excess liability policies that extend additional coverage beyond basic auto policy liability limits can be purchased to insulate assets and avoid underinsured issues after serious accidents. Most insurers offer these optional add-ons.

While minimum liability policies pose higher underinsured risks, prudent drivers invest in umbrella excess liability limits above state minimums to match their asset exposure and avoid personal liability beyond caps in serious crashes.

Initial Claim Evaluation and Notification

In the aftermath of a car accident, victims are often overwhelmed with medical bills, repair costs, and potentially lost wages. The hope lies with the insurance claim, but what if the damage exceeds the insurance limit?

The process that unfolds requires precise steps, starting with an initial claim evaluation and prompt notification to the involved insurance parties.

Assessing total estimated damages

After an accident, it’s imperative to accurately determine the total damages incurred. This evaluation includes tangible costs like medical expenses and vehicle repairs, as well as intangible damages such as pain, suffering, and lost future earnings.

An accurate damage estimate ensures that victims seek appropriate compensation, and it provides clarity on the financial magnitude of the claim relative to the insurance policy limits.

Notifying the insurer of excess potential

If the assessed damages appear to surpass the insurance limits, it’s crucial to promptly inform the insurer about this potential excess. Early notification allows all parties involved to strategize on the best way forward, either by seeking alternate avenues of compensation or renegotiating terms.

Additionally, this step is essential in preserving the claimant’s rights and ensuring that insurers can’t later argue that they were taken by surprise. Proactively addressing potential overages can streamline claim resolution and may lead to more favorable outcomes for the injured party.

Attempts to Settle Within Limits

While the aftermath of an accident can be chaotic, the ultimate goal for both the injured party and the insurer is resolution. Many times, this requires negotiation to reach a settlement that works for both sides. The dynamic between a plaintiff’s flexibility and an insurer’s willingness to max out the policy often determines the trajectory of these negotiations.

Plaintiff’s willingness to compromise

When damages exceed policy limits, the plaintiff often faces a dilemma: pursue a lengthy legal battle or accept a quicker settlement within the insurance limits. Many plaintiffs choose to compromise for several reasons, including the need for immediate funds to cover medical bills or to avoid the unpredictability of court decisions. This willingness, however, doesn’t mean the plaintiff undervalues their claim but rather seeks a balance between just compensation and practical resolution.Insurer willingness to pay policy maximums

From the insurer’s perspective, paying the full policy amount can sometimes be a strategic choice. Meeting the policy maximums might safeguard them from potential bad faith claims or expensive lawsuits in the future. Moreover, by offering their policy limits, insurers can expedite the settlement process and reduce prolonged legal expenses. It’s a calculated move that weighs the costs of immediate payout against the risks and costs of extended litigation.

Actions if Limits Remain Exceeded

If even maximum insurance payouts fail to satisfy injury claim values, plaintiffs may still take further legal actions to secure full compensation owed. These include asset seizure, negotiating liability releases, or compelling defendant bankruptcy if necessary.

  • Plaintiff Pursuit of Defendant’s Assets: Plaintiffs can pursue legal actions to seize identified personal assets like home equity or investments to satisfy unpaid accident judgment balance amounts exceeding caps.
  • Defendant Bankruptcy Potential: Excess liabilities could force at-fault drivers into bankruptcy if assets are exhausted, limiting plaintiff collection options.
  • Release of Liability Negotiations: Insurers may negotiate limited releases of liability for defendants in exchange for policy limit payouts, protecting them from further asset seizure.

Absent voluntary settlement, creative long-term repayment plans, or asset protection, underinsured defendants remain exposed to aggressive collection efforts for any unsatisfied judgment balances lacking coverage. However, the major federal regulation that controls debt collection tactics is the Fair Debt Collection Practices Act (FDCPA). The FDCPA forbids debt collectors from using unfair, abusive, or deceptive methods to obtain payment from you.

Litigation Considerations and Outcomes

If pursuing a satisfactory settlement with underinsured parties remains unfeasible, litigation may compel resolution but carries challenges.

Plaintiffs still face contributory negligence defenses while insurers argue against “bad faith” unreasonable failure to settle allegations. Uncertain jury verdicts could fall below owed damages.

  1. Comparative Negligence Reductions: Contributory fault assigned to plaintiffs based on actions will proportionately reduce claim values and amounts recoverable.
  2. Bad Faith Claims Against Insurer: Plaintiffs may claim the insurer violated its duty to reasonably settle within limits pre-trial. But bad faith is difficult to prove.
  3. Court Verdict Possibilities: Juries could deliver unpredictable awards above or below actual losses. Verdicts may not automatically equal owed damages.

Litigating underinsured claims requires weighing uncertain trial variables while overcoming affirmative defenses seeking to minimize liabilities based on victim actions. Settlement avoidance does not guarantee payment of full losses.

FAQs on Exceeding Policy Limits

What does it mean when a claim exceeds insurance limits?

When a claim exceeds insurance limits, it means the costs associated with an accident (like medical bills and damages) surpass the maximum amount that the insurance policy agreed to cover.

How often do car accident claims exceed insurance limits?

While not common, claims can exceed insurance limits in cases of severe accidents with significant property damage, injury, or loss of life.

What happens to the victim if a car accident claim exceeds insurance limits?

If a claim exceeds the at-fault driver’s insurance limits, the victim may need to seek compensation through other avenues, such as the at-fault driver’s personal assets or their own underinsured motorist coverage.

Can a person sue for the amount that exceeds insurance coverage limits?

Yes, a person can sue the at-fault driver for damages that exceed their insurance coverage limits, but collection can often be difficult if the at-fault party lacks sufficient assets.

Are there any laws that protect victims when claims exceed insurance limits?

Yes, laws vary by state, but many states have underinsured motorist laws that protect victims when claims exceed the at-fault driver’s insurance limits.

Can the insurance company refuse to pay beyond its coverage limits?

Yes, insurance companies are generally only obligated to pay up to the limit of the policy. Any costs beyond that limit would typically be the responsibility of the at-fault party.

What role do car accident lawyers play when a claim exceeds insurance limits?

car accident lawyers can help navigate the complexities of such a case, potentially identifying other avenues for compensation such as suing the at-fault party or accessing the victim’s underinsured motorist coverage.

Can health insurance cover the excess cost when a claim exceeds car insurance limits?

Yes, in many cases, health insurance can cover medical expenses that exceed the auto insurance policy limit. However, the specific coverage can vary depending on the health insurance policy.

How can one protect themselves if they cause an accident and the claim exceeds their insurance limits?

One way is by purchasing umbrella insurance, which kicks in when the liability on your other policies has been exhausted, providing an extra layer of protection.

Is it possible to negotiate the amount owed if a claim exceeds insurance limits?

Yes, in many cases, it’s possible to negotiate the amount owed. This is typically facilitated by a car accident lawyer who can negotiate a settlement agreement between the parties involved.

Don’t Settle for Less Than You Deserve – Consult Drake Injury Lawyers

Having your rightful accident injury compensation limited by underinsured at-fault drivers adds insult to injury. Car accident attorney Whit Drake has a proven track record of relentlessly pursuing maximum available coverage through creative legal strategies when our clients’ losses exceed liability caps.

We fight to access umbrella policies, negotiate policy limit payments upfront, and pursue additional recovery through asset seizure actions if just compensation remains out of reach. Don’t settle for less than the full value owed.

Call (205) 859-2236 or complete our secure online form for your best interests when underinsured challenges arise. Let us handle the complexity – you focus on healing.

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