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Have you ever wondered if you’re stuck with whatever amount an insurance policy says it covers after a serious car accident? Many people believe that an insurance company’s policy limits act like an unbreakable ceiling on compensation.
That’s not always true in California. Sometimes, you can sue for more—and the insurance company might have to pay. At BANA LAW, we want to explain how that happens and why insurance policy limits aren’t always set in stone.
What Are Auto Insurance Policy Limits?
Every auto insurance policy includes a maximum payout, also known as the “policy limit.” For example, you might see that a policy covers $25,000 per injured person or $50,000 total per accident. Normally, that’s the most the insurer will pay. But what if your injuries cost more than that? Or what if the insurance company acts in bad faith?
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Why Might You Need to Sue for More Than the Policy Limits?
Accident victims often face expensive medical bills, lost income, ongoing therapy, and other damages. If the policy limit is less than what you actually need, you might worry you’ll have to shoulder those costs alone. However, in California, there’s a legal route to pursue compensation beyond policy limits—especially if the insurer refuses to settle a claim when they reasonably should.
Is the Insurer Always Off the Hook After Paying Policy Limits?
No. Under California law, insurers have a duty of good faith and fair dealing toward their customers. This means they must consider the insured’s interests at least as much as their own.
If there’s a strong chance the insured will face a judgment above the policy limits, the insurance company should try to settle within those limits if possible. Failing to do so can open the door for a bad faith claim against the insurer.
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What Is “Bad Faith”?
Insurance companies aren’t allowed to gamble with your well-being. In Johansen v. California State Auto. Assn. (15 Cal. 3d 9), the California Supreme Court explained that an insurer who refuses a reasonable settlement offer because they question coverage assumes the risk of paying above policy limits if they lose in court.
Similarly, in Crisci v. Security Ins. Co. (66 Cal. 2d 425), the court noted that an insurer’s unwarranted refusal to settle within policy limits breaches the implied covenant of good faith. If found in bad faith, the insurer can be forced to pay the entire judgment—even beyond the stated policy limit.
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How Does an Insurer Breach This Duty?
An insurer typically breaches this duty by unreasonably declining a fair settlement offer or ignoring clear evidence that the claimant’s injuries are worth more than the policy’s maximum.
For instance, suppose you have a $50,000 limit, and the other side offers to settle for $45,000. If the insurance company refuses—even though it’s clear your potential liability might exceed $50,000—they could be in trouble later. Courts hold insurers accountable for not acting in the best interest of the insured.
Is It Hard to Prove Bad Faith?
It can be. You must show the insurer acted unreasonably or without a good reason.
Often, this involves detailing all your damages, providing medical records, and showing that you offered to settle for an amount within policy limits. If the insurer ignores or dismisses that, a jury or judge might decide they acted in bad faith.
What if the Insurer Disputes Coverage?
Insurance companies sometimes refuse to settle if they believe the policy doesn’t cover the accident. According to Johansen, that’s a risky move. They can’t just deny coverage without strong grounds.
If a court later decides the policy does apply, the insurer might be on the hook for the entire judgment. Essentially, they can’t gamble on coverage and expect to limit their exposure to policy limits if they’re wrong.
Will This Affect My Rates?
If you force an insurer to pay more than your policy limit, it might affect your relationship with that insurer. However, if they’ve already acted in bad faith, your main concern is recovering the money you’re owed for your injuries, losses, and future needs. That’s the insurer’s job, not yours. By working with an attorney, you can navigate these complications with professional guidance.
Do You Still Need to Prove Fault?
Yes, you do. All the rules about going beyond policy limits only apply if the other driver or party can prove you caused the accident or you’re otherwise legally responsible. Plus, there must be a clear showing that the settlement demand was fair and that the insurer unreasonably declined it.
If someone offers to settle for $1 million in a case worth only $10,000, the insurer isn’t acting in bad faith by rejecting it. It has to be a truly fair or “reasonable” settlement offer.
How Does an Attorney Help You Sue for More Than the Policy Limits?
Dealing with an insurance company can be overwhelming. They might stall, offer lowball amounts, or misrepresent coverage. A seasoned lawyer can:
- Gather evidence of injuries, medical bills, and lost income.
- Evaluate the full extent of your damages.
- Send a demand letter that clearly outlines a fair settlement.
- Keep records of the insurer’s responses or non-responses.
- Use case precedents to argue bad faith if needed.
At BANA LAW, we fight relentlessly to protect your rights and ensure insurers meet their obligations.
What if You’re the Victim in a Car Accident?
If you’re suing the at-fault driver, you might hear, “We can only pay up to our policy limit.” But if you can show the insurer’s bad faith, you may be able to get more than the policy amount. That can be important if your medical bills, lost earnings, and pain and suffering far exceed what the insurance policy covers.
Contact BANA LAW Today to See if You Can Pursue More Than the Policy Limits
If you’re battling an insurer that refuses to settle fairly, don’t just accept the policy limits as a hard cap. Contact us online or call 855-997-6599 today to see if you can pursue more. We’ll investigate the facts, consult experts, and help you decide the best path forward. Life after a car accident can be stressful, but you don’t have to face it alone—our team is here to fight for the compensation you need and deserve.
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