How Often Do Auto Accident Settlements Exceed the Policy Limits in California?


Driving a car can be a pleasant experience, but unfortunately, it also carries an element of danger.

People get into car accidents all the time. Car accidents can prove fatal; according to the California Office of Traffic Safety, 3,606 deaths were recorded in the year 2019.

When an accident happens, the people involved look to their respective insurance companies to help pay for immediate damages.

Sometimes, insurance alone won’t be enough, and a car accident claim exceeds policy coverage.

Our experienced California car accident lawyers will explain what you should know.

What Are the Car Insurance Laws in California?

In California, the law mandates all drivers carry insurance and have proof of this insurance in their vehicles.

There are several types of insurance the government accepts, including:

  • A standard motor vehicle car insurance policy,
  • A one-time cash deposit of $35,000,
  • A $35,000 surety bond from a California company, or
  • A particular DMV-issued self-insurance certificate.

Should you choose to purchase car insurance, you must have minimum liability coverage of:

  • $5,000 for property damages,
  • $30,000 for injury/death to more than one person, and
  • $15,000 for the injury/death of one person.

California only mandates the most basic forms of insurance, but many people choose to get extensive insurance to cover additional potential liability.

How Does Car Insurance Work?

Car insurance is a contract between you and an insurance company. You pay a monthly premium to the company, and in return, they reimburse you up to the policy limit for damages you suffer in a car accident. Policy limits can severely limit your ability to recover your total damages from the at-fault party. 

For example, imagine someone causes a car accident that causes a spinal injury, and the other person’s car is totaled. The $15,000 bodily injury coverage allotted by the minimum liability insurance is extremely unlikely to cover the full medical bills and lost wages suffered by the victim.

The U.S. National Library of Medicine has found injuries to the spine can incur medical bills starting around $200,000 up all the way past $800,000, and that’s not even considering lost wages and non-economic losses such as pain and suffering and lost quality of life. In this case, the car accident exceeds policy limits.

How Often Do Auto Accident Settlements Exceed the Policy Limits in California?

The truth is settlements almost never exceed policy limits. The reason behind this is that the insurer is rarely obligated to pay more than insurance limits in car accidents. Therefore, they cannot be expected to agree to settlements above policy limits. However, it is possible for settlements to exceed policy limits.

For example, if injuries are valued above policy limits, the policyholder may agree to pay some amount above the policy limit to avoid a lawsuit. For example, say you have evidence of $25,000 in damages and the policyholder’s insurance covers only $15,000.

In this situation, the policyholder may agree to pay an additional $5,000 in cash if you agree not to sue them. 

What Happens When a Car Accident Claim Exceeds Insurance Limits?

If you seek compensation above policy limits, you need to look to different sources than the at-fault party’s insurance. Your attorney can help you explore other avenues of recovery. Here are some ways you can still get compensation.

Filing a Lawsuit Against the at-Fault Party

A lawsuit may be the answer for you if you need more compensation than the other party’s insurance can give you.

The caveat to suing the at-fault party directly is that if their insurance wasn’t extensive enough to cover your damages, they may not have the assets to pay you back even if you win a lawsuit. Your attorney can advise you as to whether this is a viable approach in your situation or whether you should look for other avenues of recovery.

Uninsured/Underinsured Motorist Policy

One possible way to get money to cover your injuries is from an uninsured/underinsured motorist policy. This policy is part of your own insurance and covers damages when the other party is uninsured or their insurance is insufficient to cover the full cost of your damages.

In this case, your own insurer steps into the shoes of the third-party insurer. They will require proof of the other party’s negligence and your damages. They will look for any potential reason to deny your claim, just as a third-party insurer would.

Suing a Responsible Third Party

This solution will apply only if you determine multiple parties share responsibility for your injury. Should one party responsible for your damages be unable to pay you fair compensation, you have the option of filing a suit against another. Here are some common responsible third parties:

Third driver

One potential third party is a third driver who shares blame for causing your accident. In California, multiple at-fault parties are jointly responsible for all economic damages (e.g., medical bills, lost wages) caused to a party, even if they were directly responsible for only a portion. 

For example, say that you were rear-ended by a driver whose vehicle was pushed into you by another vehicle rear-ending them. Perhaps the rear driver is 60% responsible for the accident but the driver who hit you is 40% responsible because they were following you too closely. The rear driver is underinsured but the driver who hit you has a large policy.

You could sue the driver who hit you for the entire amount of your economic damages, and then it would be their responsibility to seek compensation from the other driver for their share. However, you could recover only 40% of your non-economic damages (e.g., pain and suffering) from that driver, proportionate to their share of fault.

Manufacturer of a defective auto part

Another possible responsible third party is the manufacturer of a defective auto part. For example, you could potentially hold a manufacturer liable for producing faulty brakes that didn’t activate when you needed them to.

In this case, you would have to prove both that the brakes were defective when you bought the car and that the defective brakes are what caused your injury. 

Employer of an at-fault driver

A final type of responsible third party is the employer of an at-fault driver. Suppose an employee driving a company car or otherwise performing the functions in the scope of their employment causes your accident. In that case, you may be able to hold their employer liable for your injuries. This legal doctrine is known as respondeat superior.

We’re Here To Help

If you suffer an injury in a car accident, don’t hesitate to reach out to our attorneys at Wakeford Law today. We have helped our clients in San Francisco recover millions of dollars. We pride ourselves on being problem-solvers who are attentive to the individual needs of our clients.

Give us a call at (415) 569-7495 or send an online message, so we can get started pursuing the compensation you deserve.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.