The First Steps to Exceeding Policy Limits
As lawyers representing plaintiffs, we often encounter the term “taking the lid off” or “opening up” the policy. But what exactly does it mean, and how can it be achieved? This issue arises in personal injury cases where the plaintiff’s damages surpass the defendant’s available policy limits. To shed light on this process, we will explore the necessary steps to take in such situations.
Verify Insurance Coverage
The initial task is to determine all coverages applicable to the loss. Send a letter to the insurance carrier, informing them of your representation. Request confirmation of all available limits covering this particular loss, including excess and umbrella coverages. Emphasize the significant injuries your client has suffered and their impact on the case. Refer to the legal precedent set by “Boicort v. Amex. Assurance Co.” (2000), which states that the failure to provide this information can expose the carrier to allegations of bad faith.
In your letter, ask for a certified copy of the policy(s) providing coverage(s) and a declaration from the insured, confirming that they were not working at the time of the accident. Additionally, conduct thorough research on potential coverage aspects. Review the police report to determine ownership of the vehicle and investigate whether the adverse driver was working at the time of the accident.
Include any relevant information from the police report, such as significant injuries, in your letter. If your client sustained brain injuries and was airlifted to a trauma center, provide explicit details to immediately notify the carrier of the gravity of the injuries. If available, include photographs of the injuries or damage to the vehicle in the initial letter.
Assembling Documentation of Harms and Losses
Gather all relevant documentation, such as the police report, ambulance report, fire department report, 911 tapes, witness statements, scene and vehicle photographs, medical records, billing statements, and loss of earnings documentation. This comprehensive collection of evidence is crucial for effectively presenting your case.
Obtain Client Consent to Demand Policy Limits
If the value of your client’s case exceeds the determined policy limits and you intend to demand those limits, ensure you have your client’s written consent. Explain the contractual limitations of policy limits and the potential consequences if the carrier fails to accept the settlement offer within those limits. It’s important to highlight the possibility of the defendant seeking bankruptcy protection in the face of adverse judgment beyond the policy limits. Your client must fully comprehend the situation before proceeding.
Present Settlement Offer within Policy Limits
Once you have gathered all the necessary evidence, it’s time to send out the “Offer to Settle Within Policy Limits.” Ensure you follow these tips:
- Send the letter via certified mail with a return receipt requested.
- Explicitly state that it is an offer to settle within the policy limits in both the heading and body of the letter.
- Use clear and unequivocal language to convey your intentions. For example:
- “Please accept this letter as a formal demand for settlement on behalf of Jenny Perfect, a minor.”
- “The purpose of this letter is to make a clear and unequivocal offer to settle within the policy limits of the insurance covering your insured.”
- Include the specific dollar amount and policy number in the caption.
- Set a time limit for the offer and clarify it in the caption and body of the letter. A reasonable timeframe would be around 30 days.
- Provide a detailed analysis of liability and damages to leave no doubt about the magnitude of the case.
- Cite relevant laws that confirm the ramifications of failing to settle, such as the “Comunale Rule” and “Crisci v. Security Ins. Co.”
Understanding the Applicable Laws
Several key legal principles are relevant to this process. For instance:
- The duty of good faith and fair dealing requires an insurer to settle within policy limits when a reasonable offer is made and liability is reasonably clear.
- The insurer must consider the interests of the insured as much as its own when evaluating a settlement offer.
- Mistaken belief in noncoverage does not absolve an insurer of liability for refusing a reasonable settlement offer.
- An insurer’s failure to accept a reasonable settlement offer within policy limits can result in liability for the entire judgment against the insured.
Useful CACI Instructions
The California Civil Jury Instructions (CACI) provide helpful guidance for presenting your case, including:
- CACI 2334 – Refusal to accept a reasonable settlement within policy limits.
- CACI 2337 – Factors to consider in evaluating an insurer’s conduct.
Familiarize yourself with these instructions to strengthen your argument and establish a strong legal foundation.
What to Do Next
If the insurance carrier fails to accept the policy-limits demand and continues to provide a defense to its insured, you must obtain a judgment against the insured. If the judgment exceeds the policy limits, this can establish a claim on behalf of the insured, asserting that the carrier breached its duty of good faith. Your client can then pursue this claim after it has been assigned to them.
If the carrier is not providing a defense, different rules apply, and the insured can settle the case without going to trial. In either scenario, it is crucial to obtain an Assignment of Rights and Covenant Not to Execute from the insured to pursue recovery beyond the policy limits.
By following these steps and understanding the legal principles at play, you can navigate the process of exceeding policy limits in personal injury cases successfully.