Collecting Injury Compensation Beyond Insurance Policy Limits

It's not easy, but you can sometimes collect personal injury damages beyond the limits of the at-fault party's insurance coverage.

Insurance companies assume financial responsibility for injuries and other damages resulting from a wide variety of mishaps, from slip and fall accidents to medical malpractice. But one thing to keep in mind—especially if you decide to file a personal injury claim—is that insurance companies usually only pay out to the policy limits. In this article we'll explain how policy limits work, and how you might be able to collect compensation above and beyond those limits.

How Insurance Policy Limits Work

When any kind of liability insurance policy is purchased, there is always a policy limit in place. This refers to the maximum dollar amount the insurance company is responsible for in terms of losses arising from an incident that triggers coverage. For example, if you buy a liability car insurance policy that has a $50,000 limit, the insurance company is going to pay out only $50,000 to anyone who suffers injuries and/or vehicle damage in an accident you cause. If there are $100,000 in damages, the insurance company isn't going to pay the excess $50,000. This money, if awarded by a judge or jury, will have to come from somewhere else.

Can You Collect Excess Damages?

There are a number of ways that an injured person may collect compenastion in excess of insurance policy limits. These methods include:

  • bringing a personal injury lawsuit against more than one defendant
  • recovering under an umbrella insurance policy, and
  • trying to collect from a defendant personally.

Let's take a closer look at these three options.

Suing Additional Defendants

Sometimes, more than one party can be held legally and financially responsible for an accident. In many such cases, the different defendants may be said to be "jointly and severally" liable for the whole amount of damages. This would mean that if there were two defendants and each had a policy limit of $50,000, both of those defendant's policies could likely be used to satisfy a $100,000 judgment.

Of course, there aren't always multiple defendants or multiple responsible parties. But some examples of situations where there might be multiple defendants include:

  • Medical malpractice: There might be multiple defendants if both a hospital and a doctor committed medical negligence when providing care to a patient.
  • Product liability: The manufacturer of a defective product can usually be sued, and a case might be possible against the distributor or even the store that sold the product.
  • Vicarious liability cases: These are situations in which an agent is acting on behalf of someone else, like an employee who got into a car accident while "on the clock" of the employer. The theory here is that the employer assumes legal responsibility for the employee's negligence.

Umbrella Policies

In certain instances, even if there is a single defendant, there may be multiple insurance policies in play. Some defendants, especially corporate entities and large businesses, may have an umbrella policy that essentially "goes over" all of the other insurance coverage they have. This kind of policy is designed to kick in when the policyholder faces liability in excess of the specific original policy limits.

For example, assume that a company had $100,000 in liability protection and a $50,000 umbrella policy. The first policy would pay up to $100,000. The second would kick in and pay $50,000 more if the damages exceeded the amount of coverage available under the first policy.

While umbrella policies are especially common among corporate or business defendants, some private individuals may have them too. So it's best to do your homework and get a clear understanding of all the insurance policies that may be in play for the defendant in your case.

Collecting From the Defendant Personally

In many cases, if your damages exceed the at-fault party's insurance policy limits, your only recourse will be to collect directly from the defendant. This can be hard to do if the defendant does not have cash or assets to pay you.

You may be able to go to court and get a judge to order wage garnishment or to place a lien on the defendant's properties, but this depends on the defendant having wages and having property to place a lien on. If a defendant really has no money or assets, then a judgment in excess of the policy limits is going to be virtually uncollectible.

When the Insurance Company Acts in

Bad Faith

If you're facing liability and your own insurance company has the opportunity to settle a claim for an amount within the policy limits, but they do not do so, the company might be held liable for the full amount of damages that result from any jury verdict against you.

Often, bad faith on the part of the insurer is required in order for this kind of protection to kick in. For example, if it is very clear that a plaintiff should be able to recover under the terms of the policy, and the plaintiff is willing to settle, but the insurance company won't, then the insurer might be considered to have acted in bad faith. But this kind of situation is rare. Usually, if an insurance company denies a claim or denies coverage altogether, it has a sound reason for doing so. If the plaintiff didn't have a strong case at all and his or her settlement demands were unreasonable, an insurance company's refusal to settle is not going to equal "bad faith."

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