What Happens When I Am Sued For More Than My Liability Coverage?

Q: I rear-ended someone and they sued me. My liability coverage is $100,000 but they are going for more. What exactly happens after that? Do they take my personal property?

Before pursuing an “excess judgment” (a recovery in excess of an at-fault driver’s liability limit), personal injury attorneys will typically advise their clients to offer to settle their bodily injury claims for an amount equal to the at-fault driver’s liability limit (there are a number of reasons for this which I will not address here). Thus, it is likely that your insurance company has already declined an opportunity to settle the adverse driver’s claim for your $100,000 liability limit.

Although you may be personally responsible for the amount by which a future verdict exceeds your liability coverage, you might have a claim for “bad faith” against your insurance company in the event that were to happen. The theory of liability would be that your insurance company unreasonably declined an opportunity to settle your claim for your liability limit, thereby unnecessarily exposing you to an excess judgment.

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