How Often Do Auto Accident Settlements Exceed The Policy Limits?

Posted on December 2, 2024

Auto accident settlements exceeding policy limits are uncommon, but can occur in cases involving severe injuries, multiple victims, or bad faith by insurers. 

While specific statistics on how often auto accident settlements exceed policy limits are limited, the following factors contribute to their rarity

What Does Exceeding the Policy Limits Mean? 

Policy limits are the maximum amount an insurance company agrees to pay under a liability policy, based on the coverage purchased by the at-fault party. When damages (losses) exceed these limits, victims may face challenges in obtaining full compensation. 

While specific statistics on how often auto accident settlements exceed policy limits are limited, the following factors contribute to their rarity:

Higher Policy Limits

Many drivers purchase higher coverage than the minimum required, reducing the likelihood of exceeding limits.

Settlements Within Limits

Insurance companies often negotiate settlements to remain within policy limits, avoiding excess liability for their policyholders.

Lawsuits Are Less Common

Most auto accident claims are resolved through settlements rather than lawsuits, which limits the number of cases that pursue compensation beyond policy limits.

Understanding Policy Limits in Nevada

Insurance policy limits vary depending on the coverage purchased by the policyholder. In Nevada, the minimum required liability insurance coverage for auto accidents includes:

  • $25,000 for bodily injury or death of one person.
  • $50,000 for bodily injury or death of two or more persons.
  • $20,000 for property damage.

Policyholders can purchase higher coverage limits, but not all drivers opt for more comprehensive policies.

Why Settlements Exceed Policy Limits

Settlements exceeding policy limits typically occur in the following situations:

Severe Injuries or Fatalities

When an accident results in catastrophic injuries, such as spinal cord damage, traumatic brain injuries, or fatalities, the damages often exceed policy limits. Victims may require extensive medical treatment, rehabilitation, or compensation for loss of future income, leading to claims beyond the available coverage.

Multiple Victims

Accidents involving multiple injured parties can quickly surpass policy limits. For example, a $50,000 bodily injury limit may be insufficient to fully cover three victims’ losses.

Bad Faith by the Insurance Company

If an insurance company acts in bad faith by refusing to settle a claim within the policy limits when it had the opportunity to do so, it can be held responsible for damages exceeding those limits. Courts may require the insurer to pay the full amount of damages if bad faith is proven.

What Are the Options When Policy Limits Are Exceeded?

When damages exceed the at-fault party’s policy limits, victims have several options for pursuing additional compensation:

Uninsured/Underinsured Motorist Coverage (UM/UIM)

If you carry UM/UIM coverage you may be able to file a claim with your insurer to cover the difference. 

The At-Fault Party’s Personal Assets

If the at-fault driver has significant assets, victims can pursue a lawsuit to pay your remaining damages. However, this option is not always viable.

Umbrella Insurance Policies

Some individuals or businesses carry umbrella insurance policies, which provide additional liability coverage beyond standard auto insurance. Victims may recover excess damages through these policies.

Negotiating a Payment Plan

In some cases, you may be able to negotiate a payment plan with the at-fault party.

Litigation Against the Insurance Company

If the insurer acted in bad faith, you can file a lawsuit against the insurer to recover damages exceeding those limits.

How an Attorney Can Help

An experienced Las Vegas Vehicle Collision Attorney can assist by:

  • Evaluating the Case: Attorneys assess the damages and explore all potential sources of compensation.
  • Negotiating with Insurers: Attorneys negotiate aggressively to maximize settlements within policy limits or pursue bad faith claims when necessary.
  • Filing Lawsuits: If litigation is required, a lawyer can handle all the paperwork and represent you in court.
  • Exploring UM/UIM Coverage: An attorney can help you file a claim with your insurer.  

Hiring a lawyer will not only significantly increase your chances of a favorable outcome and recovering the full extent of your losses, but will also give you peace of mind while you recover.