Excess judgments: when a verdict is larger than your policy limit

When a judgment is larger than your liability limit, your insurer pays up to the limit and you owe the rest personally. The winning plaintiff can then try to collect that remainder from your paycheck, bank accounts and property, subject to the exemptions your state allows. The exception is the insurer's own conduct: if it turned down a reasonable chance to settle the case within your limit, many states let you, or the injured person acting on your behalf, make the insurer pay the excess.

This article is about the mechanics: what "excess" means in dollars, how collection works, why a time-limited settlement demand matters so much, how a case changes when the insurer declined a fair offer, and what an umbrella policy does. The doctrine itself is covered in insurance bad faith explained; here the focus is on how a case moves from verdict to payment.

What "excess" means

Your liability coverage promises to pay what you are legally obligated to pay others for injuries or property damage you cause, up to a stated cap. A split limit written 100/300/50 means up to $100,000 per injured person and $300,000 per accident for bodily injury, and $50,000 for property damage (liability limits). The cap is the most the insurer owes in damages on that claim, however large the verdict is.

Say a driver with a 100/300/50 policy is found 100 percent at fault, and a jury awards one injured person $450,000 (a hypothetical figure). The result is:

The $350,000 is the excess judgment. It is a debt like any other, and it can accrue interest at the rate the state sets for judgments. If there are several injured people, each has a share of the per-accident limit, a problem addressed in how insurers split limited coverage among several injured claimants.

It also helps to know what the limit does not cap. The duty to defend you is separate from the limit, and in most personal auto policies the insurer's defense costs do not reduce what is available to pay the verdict. That is a feature of the policy wording, so read yours.

How a plaintiff collects an excess judgment

A judgment is a court order that you owe a sum of money. It does not by itself move any money. To get paid, the plaintiff (now a judgment creditor) uses collection tools the state allows. The tools, and what limits them, are:

• Wage garnishment. The court orders your employer to withhold part of each paycheck. Federal law caps ordinary garnishment at the lesser of 25 percent of disposable weekly earnings or the amount by which those earnings exceed 30 times the federal minimum hourly wage (15 U.S.C. 1673). Individual states can set their own rules for garnishment, so the practical limit where you live may differ.
• Bank levy. The creditor serves the bank, which freezes and turns over funds in your accounts, again subject to exemptions for certain income such as some benefits.
• Judgment lien on real estate. Recording the judgment can attach a lien to land you own, so a sale or refinance has to pay it off. Forced sale of a home is the creditor's last resort and is limited by homestead protections.
• Debtor's examination. The creditor can ask a court to order you to answer questions about your assets under oath.
• Seizure of other property. Vehicles, investment accounts and business interests can be reachable, within exemptions.

The homestead and other exemptions

Every state exempts some property from judgment creditors. How much varies enormously. Florida's constitution, for example, exempts a homestead from forced sale under court process, no matter how large its value, up to 160 contiguous acres outside a municipality or one-half acre inside one, with exceptions for taxes, purchase and improvement debts and labor on the property (Florida Constitution, Article X, Section 4). Other states protect a home only up to a stated amount of equity, and some protect retirement accounts or wages more than others. Because of that, the same excess verdict can be devastating in one state and manageable in another.

Do not treat this as a plan. A reader whose home is protected may still lose savings, a second property, or years of paycheck withholding, and the judgment keeps accruing interest while it remains unpaid. For the retirement-account side of the question, see protecting retirement savings from an auto liability judgment and Can they take your savings? How accident judgments are collected.

Bankruptcy

Some defendants with an excess judgment consider bankruptcy. Federal law lists debts that bankruptcy does not erase, and two of them matter to crash cases: debts for willful and malicious injury, and debts for death or personal injury caused by the debtor's operation of a motor vehicle while unlawfully intoxicated (11 U.S.C. 523(a)(6) and (a)(9)). A judgment from an ordinary careless-driving crash does not fall in those categories, so it is the kind of debt bankruptcy can sometimes address, but bankruptcy carries serious costs and long-lasting credit consequences, and the right chapter and exemption choices belong to a bankruptcy attorney.

Why the time-limited demand matters

Most excess verdicts have a prelude: an earlier opportunity to settle within the limits that nobody took. In a serious injury case the plaintiff's lawyer sends the insurer a policy limits demand, an offer to settle all claims against the insured for the policy limit, usually with a written deadline. The insurer then decides whether to pay the limit. If it accepts, the case ends and the insured owes nothing more. If it refuses and the verdict later exceeds the limit, the demand becomes the central exhibit in any later dispute.

Time-limit demands are legitimate tools, and they are also sometimes used to set up claims against the insurer, which is why courts and legislatures look closely at whether the insurer had a fair opportunity to evaluate the claim. Practical questions that tend to decide whether a refusal was reasonable include:

1. How much time did the insurer have to receive medical records and investigate?
2. Did the demand ask for something the insurer could not deliver, such as a release for a person who was not insured, or a condition about liens?
3. Was fault clear, and was the injury documented?
4. Did the insurer tell its insured about the demand and the risk of an excess verdict?
5. Did the insurer ask for more time or information, and was the request answered?

If you are the insured and receive an "excess letter" or learn of a demand, excess letters and time-limit demands: what to do as the insured explains what to do, and the broader sequence is in refused settlements and excess judgments: the insurer's duty to settle.

The insurer's duty to settle within limits

Liability policies give the insurer control of the defense and the settlement. Courts in many states have said that in return the insurer must consider the insured's interests, including the risk of a verdict above the limit, when deciding whether to settle. Two California Supreme Court decisions show the reasoning in plain language, and many states have similar rules developed through their own cases, so check the law where you live.

In Comunale v. Traders & General Insurance Co. (1958), a driver's insurer refused to defend and refused a $4,000 settlement offer within a $10,000 per-person limit. The trial ended in a $25,000 judgment for the injured husband and $1,250 for his wife. The court said an insurer that controls settlement is liable for the entire judgment, including the part above the limit, if it acts in bad faith in refusing a settlement, and that an insured's claim against the insurer for an excess judgment based on a wrongful failure to settle can be assigned, in that case to the injured person (Comunale, 50 Cal.2d 654).

In Crisci v. Security Insurance Co. (1967), a landlord had $10,000 in liability coverage after a stair tread gave way under a tenant. The insurer rejected a $9,000 settlement demand, the jury awarded $101,000, and the landlord, an elderly widow, was left with the excess; she settled with the injured people, assigned her claim against the insurer to them and later sued the insurer herself. The court held that an insurer's liability can rest on an unwarranted refusal of a reasonable settlement offer, even without proof of dishonesty, and set a test: whether a prudent insurer without policy limits would have accepted the offer (Crisci, 66 Cal.2d 425).

Two lessons carry beyond California. First, "reasonable" is judged against the risk of a larger verdict, not against what the insurer thought the case was worth. Second, a refusal is not automatically bad faith; it is bad faith when no prudent insurer without a cap on its own exposure would have declined.

When the insurer declined a reasonable offer: how the case moves

Once the excess verdict is entered, the case changes from a negligence case into an insurance case. The path usually looks like this:

1. The verdict and judgment. The insurer pays its limit (often after an appeal bond or a post-trial motion is resolved). The plaintiff now holds a judgment for the remainder against the insured.
2. The insured's choice. The insured can pay or negotiate, or can sue the insurer for the excess on a failure-to-settle theory. If the insured cannot afford to pay, the plaintiff often offers a deal: agree not to collect from you personally in exchange for an assignment of your claim against the insurer.
3. The bad-faith claim. Whoever brings it (the insured, or the plaintiff as assignee) must show that there was a chance to settle within limits, that the offer was reasonable, and that the insurer's refusal fell below the standard the state sets. Damages usually start with the excess judgment and can include more, depending on state law.
4. Resolution. Many of these cases settle, and the settlement often pays a substantial part of the excess.

The insured's cooperation matters. An insured who hid facts from the insurer, missed the suit papers or ignored requests may give the insurer defenses that weaken the later claim.

Assignments and consent judgments

Two devices appear again and again in excess cases.

An assignment of rights transfers the insured's claim against the insurer to the injured person, as happened in both cases above. The injured person then stands in the insured's shoes against the insurer.

A consent judgment is an agreed judgment, typically used when the insurer has denied coverage or refused to defend. In Florida this is known as a Coblentz agreement, after a 1969 Fifth Circuit case. The Florida Bar Journal describes it as a device in which the insured lets the claimant take control of the case, agrees to a consent judgment, assigns its policy rights to the claimant, and the claimant agrees not to collect from the insured whether or not the insurer pays. To enforce it against the insurer the claimant must prove coverage, a wrongful refusal to defend, and a reasonable settlement made in good faith, with the amount objectively reasonable (Florida Bar Journal). An insured should not sign any such agreement without independent counsel: a mistake can forfeit coverage the insured still has.

Florida's 2023 changes: a dated example

Florida shows how a state can tilt the balance. Section 624.155 of the Florida Statutes creates a civil remedy against an insurer for not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so. In 2023, HB 837 added a 90-day safe harbor to the law (Florida Statutes, 624.155). As of November 2026, the statute provides, in summary, that:

• A bad-faith action over a liability claim does not lie if the insurer tenders the lesser of the policy limits or the amount demanded within 90 days after receiving actual notice of a claim supported by sufficient evidence.
• "Mere negligence alone is insufficient to constitute bad faith."
• The insured, the claimant and their representatives also owe a duty to act in good faith in furnishing information, making demands, setting deadlines and attempting to settle, and a trier of fact may consider a failure to do so in reducing damages.
• When several claimants have competing claims from one accident, an insurer that files an interpleader action or agrees to binding arbitration within 90 days is not liable beyond the limits for failing to pay one or more of the claimants.

Florida is one state. Other states set their own rules on demands, notice and standards, and some rely on case law rather than statutes. Use the state insurance department or a licensed attorney for the rules in your state, and see state car insurance requirements lookup for the basic coverage rules.

Why an umbrella policy matters

An umbrella is the standard way to protect against an excess verdict before it happens. The Insurance Information Institute (Triple-I) describes an umbrella as additional liability protection beyond your auto or homeowners coverage, one that responds after the liability limit on an underlying policy is used up; it adds that insurers generally require a minimum amount of underlying coverage, typically about $250,000 for auto liability and $300,000 for homeowners (Triple-I, umbrella liability policy).

Triple-I also notes that an umbrella can cover some claims that the underlying policies often do not, such as libel or slander. Cost and requirements vary by company; see umbrella insurance: liability protection above your auto policy and adding an umbrella policy to your auto bundle: what it requires.

If you are facing a possible excess verdict

1. Read the complaint's damages claim and compare it with your declarations page. If it asks for more than the limit, you have exposure.
2. Write to the insurer asking it to settle within limits if it can, and ask it to confirm every settlement demand it has received.
3. Gather information for the file, including any other insurance (an umbrella, a business policy, an employer's coverage if you were on the job).
4. Consult personal counsel about the exposure, at your own cost; the defense lawyer the insurer assigned is there to defend the case.
5. Do not make agreements with the plaintiff or move assets without legal advice; transfers made to avoid a judgment can themselves be challenged.
6. Keep every letter, including the insurer's, and respond to deadlines in writing.

Common questions

Does the insurer have to pay the excess if it loses a bad-faith case?

It depends on the state and the outcome. Where an insurer is found to have wrongfully refused a reasonable settlement offer, the usual measure includes the amount of the excess judgment, as in the California cases above, but standards of proof and recoverable damages vary by state.

Can the plaintiff go after my employer or the car's owner instead?

Possibly. Vicarious liability, owner liability and negligent entrustment rules vary, and each can create an additional defendant with its own coverage. Negligent entrustment, the rule about lending a car to someone unfit to drive it, is one example.

Does a higher limit really cost much more?

The price of limits does not rise in a straight line; see why doubling liability limits does not double the premium for why doubling a limit does not double the premium. Compare actual quotes for your state and vehicles.

What if my limits are only the state minimum?

State minimums are often far below the cost of a serious injury, so a modest-limit policy makes an excess verdict more likely. The minimums for each state are in state car insurance requirements lookup; whether to carry more is a decision about your assets and your tolerance for risk.

Key takeaways

• Your insurer pays up to the limit; you personally owe any judgment above it, and the plaintiff can use garnishment, levies and liens to collect, subject to your state's exemptions.
• A time-limited demand to settle within limits is the key event; an insurer that unreasonably refuses it may become liable for the excess, under the standard your state applies.
• California's Comunale and Crisci decisions illustrate the rule, and Florida's section 624.155 (with its 90-day safe harbor added in 2023) shows how a statute can change it.
• Never sign an assignment or consent judgment without independent counsel.
• An umbrella policy, and limits chosen against your assets rather than the state minimum, are the main protections before a crash.