Auto Accident Settlements Exceeding Insurance Policy Limits

Legally Reviewed and Edited by: Terry Cochran

Cases where auto crash settlements exceed the policy limits of an at-fault driver, are relatively rare. They happen only when a jury returns a verdict greater than the defendant’s insurance coverage, or the defendant has insufficient assets to settle the part of the claim that exceeds their insurance limits.

Cases where settlements exceed the defendant’s insurance limits are complex. An accident victim needs good legal advice from an experienced personal injury lawyer. The car accident attorneys at Cochran Kroll & Associates, P.C. have the expertise to guide you through the legal process and help ensure you get a fair settlement if you have been injured in a car accident.

How Do Drivers Obtain Low Policy Limits?

The auto no-fault law in Michigan stipulates that drivers must have a minimum of $250,000/$500,000 in auto liability insurance. However, this law allows drivers to opt for lower limits of $50,000 and $100,000.

The low limit option is the main cause of underinsured drivers. A driver may take a lower limit for several reasons. Perhaps, they think an accident will not happen to them, and they will save on insurance premiums. But, if they have an accident and the settlement is more than their insurance coverage, this could be an expensive mistake because their assets will be used to satisfy any outstanding judgment debt.

A driver may choose a lower limit simply because they can not afford higher insurance premiums. In these circumstances, they may not have assets to cover any judgment above their insurance limit. This is problematic for the accident victim whose settlement exceeds that driver’s liability limit.

What is the Result if an Auto Accident Claim is More Than the Insurance Limit?

When an auto accident claim exceeds insurance policy limits, there are a few potential outcomes:

  • An “over the limits” verdict will be handed down against a defendant with sufficient assets to meet the order.
  • The at-fault driver will financially contribute the part of the settlement over the insurance limit.
  • A bad faith claim may be brought against the at-fault driver’s insurance company.

A bad faith claim is where the at-fault driver’s insurer tries to make the insured driver liable to an excess judgment. By failing to act reasonably to settle the claim, they can seek to minimize their liability and unfairly expose the at-fault driver to an excess judgment.

The at-fault driver assigns their bad faith claim against their insurance company to the plaintiff in these cases. In turn, the plaintiff agrees not to pursue the at-fault driver for payment.

Will Underinsured Motorist Coverage Help?

If a motorist has a car accident with an underinsured driver, they may incur losses such as lost wages, medical care bills, and property damage. In the case where the underinsured driver has assets that can be used to satisfy any judgment, the plaintiff will be able to obtain financial recovery.

There are situations where the at-fault parties have insufficient insurance coverage to satisfy a verdict and do not have assets to make up the difference. If they cannot pay the difference between the amount of their liability insurance and the verdict amount, the accident victim may be unable to recover the whole judgment amount. This could put them seriously out of pocket.

Underinsured motorist coverage compensates victims with pain and suffering and other damage claims that exceed the at-fault driver’s policy limits. You purchase underinsured coverage with your uninsured motorist coverage. In Michigan, your underinsured coverage pays the difference between the Defendant driver’s liability coverage and what you purchase to protect your from an underinsured Defendant. If you purchase $100,000 of underinsured coverage, your insurance company will make up the difference between the amount of coverage the Defendant driver’s insurance company must pay under its policy and the $100,000 you have purchase. If the Defendant driver’s policy is $50,000, then your underinsured motorist policy will pay the additional $50,000.

If the at-fault driver policy limit does not cover the claimant’s medical bills, they may have to rely on their underinsured motorist coverage to cover their losses. However, the at-fault driver may have to pay back your insurance company.

Also, you cannot settle with the underinsured motorist without seeking the approval of your insurance company. If you do, you will violate the terms of your insurance policy since your insurance company has the right to seek reimbursement from the at fault driver directly. Always consult with an attorney before attempting to settle your own claim against an underinsured motorist.

Auto Accident Settlements

How Do I Recover Compensation if it Exceeds the Insurance Limit?

If you have to sue the at-fault driver and obtain a judgment, you may need to enforce it against them. The accident victim may achieve this where the compensation sum awarded exceeds the policy limits of the defendant’s auto insurance in two ways:

  • By obtaining an order from the court requiring the sheriff to seize and sell the defendant’s goods. This includes all the defendant’s personal property, including assets, such as stocks and bonds; cash; and items, such as cars and boats. The value of the goods seized must only be sufficient to cover the at-fault driver’s liability under the judgment.
  • By obtaining a judgment lien and recording it against real property (such as a house) owned by the defendant. This should include real property owned by the defendant at the time of the judgment and any real property acquired after the judgment date. (MCL 600.2803) By recording the judgment lien against the property, the at-fault driver cannot pass good title to a buyer, so they are unable to sell it.

Major problems in securing financial recovery for the plaintiff arise where:

  • The at-fault driver does not have the assets to satisfy their part of the judgment debt. Where there are insufficient assets, regrettably, the injured party may lose out.
  • The at-fault driver may declare themselves bankrupt. This will preclude the plaintiff from proceeding against them.

Cochran Kroll & Associates, P.C. Can Help You Pursue a Fair Settlement

If you have been involved in a car accident with an underinsured or uninsured motorist, contact an auto accident lawyer at Cochran Kroll & Associates, P.C. Our experienced and compassionate personal injury attorneys can help you understand your legal options and the legal process necessary to successfully pursue your compensation claim.

Our contingency fee basis means we only get paid if we win your case, so there is no financial risk to you to get started. Call our law firm today at 866-MICH-LAW and schedule your no-obligation, free case evaluation.

Disclaimer : The information provided is general and not for legal advice. The blogs are not intended to provide legal counsel and no attorney-client relationship is created nor intended.

Thomas has a law degree from the University of Nottingham. He practiced law for 20 years before working in Dubai in the financial sector for 3 years. He now writes on financial and legal topics.

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