What is Policy Limits Demand?

What is a policy limits demand in personal injury law?

A policy limits demand is a settlement offer made by an injury victim’s attorney requesting the at-fault party’s insurance company to pay the maximum amount available under their policy. The demand is typically made when damages clearly exceed the insurance coverage limits. It can set the stage for a bad faith claim if the insurer refuses to pay.

• Requests full policy coverage amount.
  
  
• Made when damages exceed insurance limits.
  
  
• Can lead to bad faith lawsuits.
  
  
• Common in serious injury cases.
  
  

When is a policy limits demand used?

It’s usually used when liability is clear and damages are much higher than the available insurance coverage. By demanding the policy limits, the injured party pressures the insurer to protect their policyholder from excess liability.

• When fault is clear.
  
  
• Damages far exceed coverage.
  
  
• Designed to protect insured from excess exposure.
  
  
• Often made before filing a lawsuit.
  
  

Why is it a powerful legal tool?

If the insurer unreasonably refuses to pay the policy limits, they may be held responsible for any verdict above the coverage amount. This can create significant financial risk for the insurance company.

• Encourages quick, fair settlements.
  
  
• Protects policyholder from financial ruin.
  
  
• Puts pressure on insurer.
  
  
• May open door to bad faith damages.
  
  

What must be included in a policy limits demand?

The demand typically includes a detailed account of the incident, evidence of liability, proof of damages, and a specific deadline for the insurer to respond. Failure to respond within the deadline strengthens a potential bad faith claim.

• Detailed case summary.
  
  
• Evidence of fault and damages.
  
  
• Specific payment amount (policy limits).
  
  
• Clear response deadline.
  
  

Conclusion:
A policy limits demand is a strategic move that can push insurers toward fair settlement and open the door to higher recovery if they act in bad faith.