Can A Car Accident Settlement Exceed the Policy Limit in California?
August 13, 2025 Posted In Car Accidents
In California, a car accident settlement usually does not exceed the at-fault driver’s insurance policy limits. However, exceptions exist when insurers act in bad faith, when multiple policies apply, or when victims can collect from personal assets or UM/UIM coverage.
Understanding Policy Limits in California
California requires drivers to carry minimum liability insurance under California Vehicle Code Section 16056:
- $15,000 for injury or death to one person
- $30,000 for injury or death to more than one person
- $5,000 for property damage
These limits are the maximum amounts the insurer must pay under the policy. If your damages exceed these limits, the insurer is not automatically responsible for paying more.
When a Settlement May Exceed Policy Limits
Although settlements typically stay within the insurance policy’s limits, certain situations can lead to recoveries beyond those limits:
Bad Faith by the Insurance Company
California law holds insurers to a duty of good faith. If an insurer unreasonably refuses to settle a claim within policy limits when liability is clear, the company may be responsible for the entire judgment—even if it exceeds the policy limit. This is called insurance bad faith. For example, if you offered to settle for $30,000 within policy limits and the insurer refused, but a jury later awarded $200,000, the insurer could be liable for the full amount.
Multiple Insurance Policies
Sometimes more than one policy applies. Common examples include:
- Employer policies: If the at-fault driver was working at the time of the accident, their employer’s commercial policy may apply.
- Umbrella policies: Some individuals carry additional umbrella coverage that increases available compensation.
- Household policies: Other household members’ policies may provide coverage if the driver was a permitted user.
The At-Fault Driver’s Assets
If damages exceed policy limits, you may pursue the driver personally. Collecting from personal assets is challenging, but possible if the driver owns property, has significant savings, or earns a high income.
Uninsured/Underinsured Motorist Coverage (UM/UIM)
Your own insurance may cover additional damages if you carry uninsured or underinsured motorist coverage. UM/UIM protection applies when the at-fault driver has no insurance or inadequate coverage to pay your losses.
Challenges in Claims that Exceed Policy Limits
Although California law allows recovery beyond policy limits in certain circumstances, doing so is rare. Many drivers who carry only the minimum required insurance do so because they have limited financial resources, which means they often lack the personal assets necessary to satisfy a judgment. Additionally, pursuing a bad faith claim against an insurance company requires extensive litigation and strong evidence that the insurer unreasonably refused to settle within policy limits.
Why Hiring a Riverside Car Accident Attorney is Critical
Recovering full compensation after a car accident is difficult without legal representation, especially when damages exceed the at-fault driver’s policy limits. Insurance companies often resist paying beyond coverage amounts and use complex tactics to protect their bottom line. A Riverside car accident attorney knows how to uncover additional sources of compensation if available. With a lawyer handling negotiations and, if necessary, litigation, you stand a much stronger chance of securing compensation that truly reflects the extent of your losses.