After a serious crash, the at-fault driver’s insurance limits are often far lower than the harm done. When that happens, the way a settlement demand is made, and the way the insurer responds, can decide whether the injured person recovers only the policy limit or much more. This article explains policy-limit demands and what “bad faith” means when an insurer refuses a reasonable settlement.
An insurer’s duty to settle
An insurance company that defends its driver has a duty to take reasonable settlement offers within the policy limits. If it unreasonably refuses one, and the case later ends in a judgment above the limits, the insurer can become responsible for the full amount, not only the limit it sold. That is the core of a “bad faith” failure-to-settle claim.
What a policy-limit demand is
A policy-limit demand is a written offer to settle the injured person’s claim for the full amount of the driver’s insurance. It usually includes the medical records and bills that show the value of the claim, and a deadline to accept. Because it can expose the insurer to more than its limit, it must be prepared carefully.
California’s rules for time-limited demands
Since 2023, California law sets specific rules for time-limited demands made before a lawsuit is filed, including what the demand must contain, how it must be sent, and a minimum time for the insurer to respond. A demand that does not follow the rules may not have the effect the injured person expects. These rules are technical; a demand should be prepared by a lawyer.
Why this matters to you
A well-prepared demand gives the insurer a fair chance to settle, and puts the risk of refusing on the insurer. In some cases, that is what turns a small policy into a fair recovery. In one of our cases, a driver’s insurer offered its $25,000 policy limit; a jury later awarded more than $26 million.
What to do
- Don’t accept a quick “policy limits” check before you know what other insurance may apply.
- Keep every medical record and bill. A demand is only as strong as its proof.
- Check your own policy for underinsured motorist coverage.
- Talk to a lawyer before any demand is sent.
Read more about our car accident and catastrophic injury cases, and see our results.
