Excess letters and time-limit demands: what to do as the insured

An excess letter means your insurer thinks the injured person's claim could be worth more than your liability limit, so you could owe the difference personally. A time-limit demand is a lawyer's offer to release you from the claim if the insurer pays the full limit by a set date. Treat both as urgent: read them the day they arrive, call the insurer's adjuster, and talk to a lawyer of your own before the deadline passes, because the deadline is where most of the legal consequences are decided.

Neither document means you are about to lose your savings. They are the moment when the interests of the insurer and the insured briefly pull apart, and the law expects the insurer to protect you in that moment. What follows explains what the letters say, what the insurer owes you, what to do in the first days, and how three common situations play out.

What an excess letter is and why you get one

When you cause a crash that injures someone, your bodily injury liability coverage pays up to your policy limit for the injured person's damages and hires a defense lawyer for you. If the claim could end up larger than that limit, the insurer owes you a plain warning. That warning is the "excess letter," sometimes called an "excess exposure letter" or a "potential excess" notice.

A typical one says four things:

• The claim against you may be worth more than your limit (for example, "$50,000 per person").
• You could be personally responsible for any judgment above that limit.
• You have the right to hire a lawyer at your own expense to advise you about the excess exposure.
• You should tell the insurer about any other insurance that might apply, such as an umbrella or a policy on another vehicle you own.

Insurers send these letters partly to meet their duties to you and partly to protect themselves. A letter that arrives early and is specific is a sign of a careful claim file. A letter that arrives after a lawsuit and a demand is not wrong, but it leaves you less time.

The letter is not a prediction that you will lose, and it is not a bill. Many claims that trigger one settle within limits. It is, however, the first written record that the insurer knew you were exposed, which matters later if something goes wrong.

What a time-limit or policy limits demand is

A policy limits demand is a written offer, usually from the injured person's lawyer, to settle the whole claim against you for the amount of your limit. A time-limit demand adds a deadline, commonly somewhere between 10 and 30 days, after which the offer is withdrawn.

The deadline is not decoration. It does two jobs. It pressures the insurer to evaluate quickly, and it creates a clean record: if the insurer lets the deadline pass with the limit available and the case later ends in a verdict above the limit, the claimant's lawyer can argue the insurer had a chance to protect you and did not.

A well-formed demand usually contains:

1. A specific dollar amount, normally the per-person or per-accident limit.
2. A deadline, often with instructions on how acceptance must be communicated.
3. A release of liability for you (and sometimes for other insureds on the policy) in exchange for payment.
4. Supporting documents, such as medical records and bills, so the insurer can value the claim.
5. Sometimes a request for a sworn statement that you have no other insurance, or a list of your assets.

Several of those details matter. Some states have passed laws that set the minimum requirements for these demands. Georgia is the best-known example: in April 2024 the governor signed Senate Bill 83, which rewrote the state's statute on pre-suit time-limited demands (O.C.G.A. 9-11-67.1) in auto cases, including how the offer must be framed. Texas, by contrast, relies mostly on court decisions. Whether a particular letter even counts as a valid demand can turn on its wording, so that is a question for the lawyer, not for guesswork.

What the insurer owes you

The insurer controls the settlement of a claim against you; the policy usually gives it the right to settle without your consent. In return, the law in most states imposes a duty: when a settlement within the limit is available, the insurer must handle it with at least as much regard for your interests as for its own. Courts describe this in different words, but a common formulation is that the insurer may consider its own interests while giving at least equal consideration to yours. California's Supreme Court laid the groundwork in *Comunale v. Traders & General Insurance Co.* (1958), holding that an insurer that wrongfully refuses a reasonable settlement within limits can be liable for the entire judgment against its insured, and later developed the standard in *Crisci v. Security Insurance Co.* (1967), where a $10,000 limit became a judgment of $91,000.

States differ on the details:

• Texas frames the duty in negligence terms. Under the Stowers doctrine, as the Texas Supreme Court applied it in American Physicians Insurance Exchange v. Garcia (1994), the duty is triggered by a demand that is within the limits, covers a claim the policy covers, and has terms an ordinarily prudent insurer would accept. A demand above the limit does not trigger it.
• Florida tightened its statute in 2023. Under HB 837, summarized by the law firm Greenberg Traurig, an insurer is shielded from a bad faith claim if it tenders the lesser of the limit or the demanded amount within 90 days after getting actual notice of the claim with enough supporting evidence, and "mere negligence alone is insufficient" for bad faith.
• Georgia courts and the legislature have spent years on how rigid a demand may be before an insurer can be blamed for missing it.
• Many other states use a general "good faith" test and look at the whole file: how fast the insurer investigated, whether it explained its decisions, and whether it told you what was happening.

Note what the duty is not. It does not require the insurer to accept every demand. If the claimant's injuries are minor, the demand is out of proportion, or the facts of fault are truly in doubt, a refusal can be reasonable. The duty also does not come from the model claims regulations. The National Association of Insurance Commissioners' Unfair Property/Casualty Claims Settlement Practices Model Regulation (a 1997 model that states adopt in their own versions) sets response times, for example 15 days to acknowledge a claim, and says an insurer may not keep negotiating with an unrepresented claimant without 60 days' written notice of a looming limitation deadline. Those rules protect claimants and are enforced by regulators. The duty to settle for you is a separate rule, enforced in court. To see how it works in your state, ask a licensed attorney, or call the state insurance department; state car insurance requirements lookup will point you to yours.

For a deeper look at the insurer's side of this duty, see refused settlements and excess judgments and insurance bad faith explained.

The first 72 hours: a checklist for the insured

The deadline may be short, and a letter can sit unnoticed in a stack of mail. Work through these steps in order.

1. Read both documents completely and note every date. Write down the deadline in the demand, the date you received it, and any time limit on a response from you. If the demand arrived through your defense lawyer, ask when it first came in.
2. Call the adjuster and ask four questions. Has the insurer received the demand? Who is evaluating it? When will you get a decision? Will you get that decision in writing before the deadline?
3. Confirm whether a lawsuit has been filed. If you were served with a summons, the clock for answering it is separate and often shorter than the demand deadline. Hand it to the defense lawyer the insurer assigned immediately.
4. List all other insurance that could apply. An umbrella policy, a second auto policy in the household, a business policy if you were on the job, or a policy covering the vehicle's owner. Give those details to the adjuster; failing to disclose other coverage can complicate things later. See umbrella insurance: liability protection above your auto policy for how an umbrella interacts with your auto limit.
5. Consult a lawyer of your own. Not the lawyer the insurer assigned to defend the lawsuit, whose job is to defend the claim under the insurer's direction. A separate lawyer, often called personal or independent counsel, who works only for you.
6. Put your position in writing. A short, polite letter or email to the adjuster, copied to your lawyer, stating that you want the claim settled within your limits (see the sample below).
7. Do not talk to the claimant, the claimant's lawyer or the claimant's insurer yourself, and do not post about the crash.
8. Do not sign anything the claimant's side sends you until your lawyer has read it. That includes affidavits about your finances and any agreement that mentions assigning your rights.

A sample letter that documents your position

If the claim could exceed your limit, a record that you asked the insurer to settle can matter later. Your lawyer can draft it, but the content is simple:

I received the letter dated [date] about the claim of [claimant] arising from the accident on [date]. I understand that the claim may exceed my $[limit] policy limit. I am asking [insurer] to settle this claim within my limits if it reasonably can, and to accept the demand dated [date] if it is within the limits. I do not want to be exposed to a judgment above my coverage. Please tell me in writing what you decide before the deadline, and why. I have attached details of the following other insurance: [list]. I am willing to cooperate fully, including by providing a statement or documents.

Keep it factual. Do not threaten, do not argue about who was at fault, and do not guess at the claimant's injuries. The goal is a dated record that says three things: you knew about the demand, you wanted settlement, and you gave the insurer what it needed.

Scenario one: a reasonable demand the insurer accepts

Say your policy has 100/300/100 limits. A pedestrian you struck while turning left has a fractured pelvis, surgery, and $85,000 in medical bills. The lawyer sends a demand for the $100,000 per-person limit, open for 30 days, with medical records and a proposed release.

Your insurer's adjuster evaluates the records, consults a defense lawyer, and concludes that a jury could award well above $100,000 given the injury. It sends you an excess letter on day 6, asks about other insurance, and accepts the demand on day 21. The release names you, you sign it, the insurer pays, and the claim ends.

What went right: the demand was within the limit, it came with documents the insurer could evaluate, the insurer told you early, and the deadline was long enough to do all of it. Your own role was small but real. You answered the question about other insurance promptly, and you sent the letter asking for settlement.

One practical point: read the release before anyone signs it. It should release you from the whole claim, and you should ask whether the payment covers every claim arising from the accident, including a spouse's separate claim or an open property damage claim.

Scenario two: a demand the insurer ignores or lets lapse

Now take a policy with 50/100/50 limits. A driver you hit from behind has a herniated disc and then a spinal fusion. The claimant's lawyer demands the $50,000 per-person limit within 14 days. The adjuster calls the claim "under review" and asks for more records. The deadline passes. Two years later a jury awards $410,000.

You are now looking at a $360,000 judgment above your limit, plus whatever the court adds in interest and costs. This is the situation the duty to settle exists for. Your personal lawyer would ask:

• Was the demand within limits and clear in its terms?
• Did the insurer have enough information to value the claim by the deadline? Did it ask for more time or more records, and did the claimant's lawyer refuse?
• Did the insurer keep you informed and tell you about the demand?
• Did the insurer properly consider your exposure, or was it driven by its own cost of paying?
• Under your state's rule, does the insurer's conduct amount to bad faith or negligence, and was any statutory safe harbor met?

If the answers favor you, you may have a claim against your own insurer for the excess. In practice, many such claims are resolved without a trial. The insurer may agree to pay the excess, or the insured may assign the right to sue the insurer to the injured person in exchange for a promise not to collect from personal assets. The mechanics, and whether such deals are allowed, vary by state and carry traps. Do not agree to anything like that without a lawyer, because a poorly structured deal can cost you the claim against the insurer.

What the insured can recover in a successful case also varies. Commonly it is the excess judgment itself, interest, and the costs of the original case. Some states allow recovery for emotional distress, as the Crisci case did at the trial level, or attorney fees; some limit punitive damages. A lawyer in your state can tell you which apply. See excess judgments for the judgment itself and what happens when damages exceed your liability limits for the whole picture.

Scenario three: a demand with conditions that cannot be met

Not every time-limit demand is a fair test. Say your limits are 25/50/25 and a crash injured two people in the other car. One lawyer sends a demand for $25,000 for a client, with a release of you, open for five days. A second claimant has not yet made a demand. The letter also demands that you personally sign a sworn statement of your assets and provide it within three days.

Problems like these appear regularly:

• Multiple claimants and one limit. Paying the full per-person limit to one claimant is not a problem; the accident limit is $50,000 in this example. But if there are three injured people, paying the whole $50,000 to one leaves you exposed to the others. Insurers in that position often file an interpleader (asking a court to divide the money) or arrange a global settlement. See multiple claimants, one policy limit: interpleader and pro rata splits. The Florida statute mentioned above specifically gives insurers a 90-day route through interpleader.
• A deadline too short to evaluate. Five days for a claim with no medical records is not a realistic window. An insurer that asks in writing for the records and a reasonable extension is building a record that the refusal was reasonable. Ask the adjuster whether it has done that.
• Conditions that go beyond the insurer's control. A demand that depends on you doing something (producing a statement, an affidavit, or additional payment from you) is different from one the insurer alone can accept. Courts in some states have said such a demand may not trigger the duty to settle, but this is state-specific.
• A release that leaves you exposed. If the release only covers part of the claim, leaves out another insured on the policy such as a relative who also was driving, or leaves liens open, accepting it may not protect you.
• An amount above the limit. In Texas, for instance, a demand above the limit does not trigger the Stowers duty.

In this scenario your task changes. Instead of urging acceptance, you ask the insurer in writing to respond to the claimant's lawyer, ask for the missing information, and seek an extension. Your personal lawyer decides whether you should supply the affidavit; if you do not have other coverage or large assets, a truthful sworn statement may support settlement, but it also becomes evidence, so do not sign it until it has been reviewed.

Hiring personal counsel and what it costs

Personal counsel is a lawyer who represents you alone in the question of excess exposure. They do not replace the defense lawyer the insurer assigns, who will keep defending the lawsuit. Personal counsel usually does these things:

• Reads the policy, the letters and the demand, and identifies the deadline.
• Writes to the insurer urging settlement within limits and asking for its reasoning.
• Reviews proposed releases, affidavits and any agreement that touches your rights.
• Looks for other coverage, including an umbrella or a policy covering the vehicle's owner.
• Tracks whether a bad faith claim may exist and preserves the evidence.

You generally pay for this lawyer yourself, though the cost is often a few hours of time compared with the exposure at stake. Some lawyers take bad faith cases on a contingency basis once there is a judgment. If the amount at risk is small relative to your assets, the cost-benefit may differ, so ask for an estimate up front. The guide on when to hire a lawyer after a car accident covers how lawyers are paid and how to find one, and your state bar association can refer you.

Common questions

Does an excess letter mean the insurer is refusing to settle?

No. It means the insurer sees a possible gap between your coverage and the claim's value. The insurer may still settle within limits. The letter is also a prompt for you to act: hire counsel, report other insurance, and say in writing that you want the claim settled.

Can I contribute my own money to close a settlement?

You can, but this is a decision for your lawyer. If a claimant will release you for the limit plus a modest amount from you, paying it may be cheaper than risking a verdict. But if the insurer has not yet properly considered the demand, paying part of the amount yourself may weaken any later claim that the insurer should have paid the whole. The structure matters.

Can the insurer make me pay if I did not cooperate?

Policies require you to cooperate in the defense: appear for depositions, provide documents, tell the truth. A serious failure to cooperate can give the insurer an argument to limit its obligations, depending on state law. That is why you should respond to the adjuster promptly, even while a lawyer advises you separately.

What if the injured person's lawyer says the claim is worth more than my limit?

Claimants' lawyers often say that, and sometimes it is true. The statement alone does not trigger anything. What matters is whether there is a written demand within the limit, whether the insurer is able to evaluate it, and what the facts of injury and fault support. The 2026 Insurance Research Council study of auto injury claims found that average payments on bodily injury claims rose from roughly $14,000 in 2017 to more than $20,000 in 2022, and that the share of claimants with attorneys rose from about 40% to nearly 50%. Most claims close well under common limits, which is why the few severe ones receive so much attention.

Key takeaways

• An excess letter warns that a claim may exceed your limit; a time-limit demand is an offer to release you for the limit if paid by a deadline. Both start a clock.
• Most states require the insurer to give your interests at least equal weight when a settlement within limits is available, but the test, the triggers and any safe harbors differ by state (Texas, Florida, Georgia and California all differ).
• Hire your own lawyer early, tell the insurer about all other insurance, and put in writing that you want the claim settled within your limits.
• Do not sign affidavits, releases or side agreements until your lawyer has read them, and do not negotiate with the claimant yourself.
• If a verdict above your limit follows a lapsed demand, you may have a claim against your own insurer; a lawyer in your state can tell you what you could recover.