When an accident or incident leads to a personal injury claim, the settlement process often revolves around insurance policies. Most individuals and businesses carry liability insurance in order to protect themselves financially in case they are found responsible for damages. However, the coverage provided by these policies has limits, which raises an important question: Can lawsuit settlements exceed insurance policy limits? The answer is multifaceted and depends on the circumstances surrounding the case.

This article will examine situations where settlements surpass policy limits, the factors influencing such outcomes, and potential recourse for plaintiffs seeking full compensation for their damages.

Understanding Insurance Policy Limits

Insurance policies are contracts with defined monetary limits that cap the insurer's obligation to pay. These limits are typically split into two categories:

• Per-occurrence limits: The maximum amount the insurer will pay for a single incident.
• Aggregate limits: The total amount the insurer will pay over the policy term for multiple claims.

For example, an auto liability policy might have a $50,000 per occurrence limit for bodily injury and a $100,000 aggregate limit. This means the insurer will pay up to $50,000 for injuries caused by one accident but no more than $100,000 for all claims filed during the coverage period.

Can a Settlement Exceed Insurance Limits?

Yes, settlements can exceed insurance policy limits, but this typically occurs in specific scenarios, including the following:

Severe Damages Exceeding Coverage:

If a plaintiff's damages (medical bills, lost wages, pain and suffering) far surpass the defendant's insurance coverage, the settlement might exceed the policy limit. For instance:

• A catastrophic car accident resulting in spinal cord injuries could lead to medical expenses exceeding $1 million. If the at-fault driver has a $250,000 policy limit, the plaintiff may seek the remaining amount from the driver's personal assets.

Bad Faith by the Insurer:

Insurance companies have a legal duty to act in good faith when handling claims. If an insurer unreasonably denies a valid claim, delays payment, or refuses to settle within policy limits despite clear liability, they could be held liable for the entire judgment amount. This is referred to as a bad faith claim.

Multiple Defendants or Policies:

In some cases, multiple defendants or policies can be targeted to maximize compensation. For example:

• In a trucking accident, both the truck driver and the trucking company might share liability. Each party's insurance coverage can be tapped to recover damages beyond the primary policy limit.

Umbrella or Excess Insurance Policies:

Some individuals or companies purchase umbrella or excess liability policies, which provide additional coverage above the standard policy limits. Plaintiffs may access these policies to recover higher settlement amounts.

Options for Plaintiffs When Settlements Exceed Limits

When damages exceed the at-fault party's insurance coverage, plaintiffs have several options to seek additional compensation:

Pursuing the Defendant's Personal Assets:

In cases where insurance falls short, plaintiffs can seek to collect the remaining balance directly from the defendant's personal assets. This includes wages, savings, or other valuable property. However, this approach may not be viable if the defendant has limited financial resources.

Negotiating Structured Payments:

Defendants with insufficient assets may agree to structured payments over time. This ensures plaintiffs receive compensation without bankrupting the defendant.

Filing a Bad Faith Lawsuit:

If an insurer acted in bad faith by refusing to settle within policy limits, plaintiffs can sue the insurer for the full amount of the judgment. Courts may award compensation that goes beyond the policy limits in such cases.

Exploring Third-Party Liability:

Plaintiffs can investigate whether other parties share responsibility for their injuries. For example, in a product liability case, a manufacturer, distributor, or retailer might all share liability, providing access to multiple insurance policies.

Statistics on Settlement and Policy Limits

• According to the Insurance Information Institute (III), the average jury award for personal injury cases in the U.S. is approximately $1 million, while the median is $95,000. Many awards exceed standard policy limits, particularly in catastrophic injury cases.
• A 2022 report by the National Association of Insurance Commissioners (NAIC) revealed that over 10% of claims resulting in litigation involve damages surpassing the defendant's policy limits.

These figures underscore the importance of understanding how settlements can go beyond insurance coverage and the avenues available to recover excess damages.

Key Considerations for Policyholders and Plaintiffs

To minimize financial risks and maximize recovery, both plaintiffs and policyholders should keep the following in mind:

For Policyholders:

• Regularly review and update your insurance coverage to ensure it reflects your assets and potential liability risks.
• Consider purchasing umbrella or excess liability insurance for added protection.
• Work with an experienced attorney to handle claims effectively and avoid bad faith allegations.

For Plaintiffs:

• Document all damages thoroughly, including medical expenses, lost wages, and pain and suffering.
• Retain a skilled personal injury attorney to identify potential sources of compensation, such as umbrella policies or third-party liability.
• Act swiftly, as statutes of limitations may restrict the time to file a claim.

Conclusion

While insurance policies are built to provide financial protection in the event of liability, policy limits are not always sufficient to cover the full extent of a plaintiff's damages. In cases where a settlement exceeds insurance limits, options such as pursuing the defendant's personal assets, filing bad faith lawsuits, or exploring third-party liability can help plaintiffs recover additional compensation. Conversely, policyholders can mitigate risks by maintaining adequate insurance coverage and seeking legal guidance when claims arise.

Need Legal Help? Brandon J. Broderick, Attorney at Law is One Phone Call Away

Navigating Personal Injury Claims can be challenging. Fortunately, you don't need to do it alone. The experienced personal injury lawyers at Brandon J. Broderick, Attorney at Law, are available 24/7 to help you understand your legal options, gather necessary evidence, and build a strong case to secure the settlement you deserve.

Contact us now for a free legal review.