What Do Insurance Coverage Limits Mean?

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By Yosi Yahoudai
Founder and Managing Partner

An accident can occur at any time, leaving serious injuries and economic losses as a consequence. Although it is common for the cause of this to have the legal responsibility to cover the expenses caused by the accident, it is common to find that the limits of what an insurer is willing to pay do not cover the costs caused by the accident. Unfortunately, the state of California only requires drivers to pay a minimum of $15,000 per injured party and $30,000 per accident claim for coverage of liability charges.

In cases like these, it is common to want to look for options that allow you to exceed these limits. Legally, this is known as a claim for insurance policy limits, and it is one of the resources that allows a plaintiff to obtain an amount that exceeds the insurance limits in a personal injury case.

In order for a lawsuit in this category to proceed, it is necessary for the injured party to demand payment of the policy limit by meeting the following criteria:

  • The claim must be formulated in clear and unambiguous terms.
  • All persons claiming damages must join the settlement lawsuit
  • All insureds (persons claimed against and for whom the policy was issued) must be released from personal liability
  • The amount requested for the settlement must correspond to the total limits of the policy and be “reasonable” considering the facts of the case (ie, liability and damages).

Any sued insurer must be given a reasonable period of time and sufficient information to evaluate the claim. Once this period has been reached, if these requisite elements are met and a suitable claim has been filed, the company may choose to reject the claim. After this, a jury can return a verdict in favor of the plaintiff, demanding a payment that exceeds the policy limit. Faced with this verdict, the insurance company has the option of a) paying this amount, or b) exposing itself to a lawsuit for acting in “bad faith” against the insured client.

Under California law, it is understood that an insurance company must accept a reasonable claim of the policy limits when the defendant’s liability for damages can be shown and these damages exceed the amount offered by the policy. The concepts of good faith and fair dealing in insurance contracts indicate that no insurer can expose its clients to personal liability if a claim exceeds the policy limits.

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About the Author
Yosi Yahoudai is a founder and the managing partner of J&Y. His practice is comprised primarily of cases involving automobile and motorcycle accidents, but he also represents people in premises liability lawsuits, including suits alleging dangerous conditions of public property, third-party criminal conduct, and intentional torts. He also has expertise in cases involving product defects, dog bites, elder abuse, and sexual assault. He earned his Bachelor of Arts from the University of California and is admitted to practice in all California State Courts, and the United States District Court for the Southern District of California. If you have any questions about this article, you can contact Yosi by clicking here.