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The law mandates that drivers carry a certain amount of automobile liability coverage. Unfortunately, these limits aren’t always enough to cover your damages, especially in cases involving severe to catastrophic injuries. Based on that, you might assume that many auto accident claims settle for more than the policy limits, but that’s rarely the case.

If you have concerns about policy limits and car accident settlement payouts, speak with one of our experienced Birmingham auto accident lawyers at Fob James Law Firm.

How Often Do Auto Accident Settlements Exceed the Policy Limits?

Alabama requires drivers to carry the minimum liability insurance amounts, which are:

  • $25,000 per person bodily injury or death in a single accident;
  • $50,000 for bodily injury or death for all people in any one accident; and
  • $25,000 in property damage in a single accident.

The first amount is what the insurance company will pay for one person in any single accident. If there are multiple injured parties in the same accident, the second amount will apply. The third amount is limited to property damage. In a 25/50/25 policy where you are the only injured party, the maximum you might receive is $25,000. If you and two passengers are injured, the available limits would be $50,000 apportioned between the three of you.

Bodily injury and property damage limits are not interchangeable. An insurance company will not use a portion of the $25,000 property damage coverage to make up the difference on your bodily injury claim.

These are the minimum amounts required in Alabama, and drivers can opt to purchase higher limits and other related coverage, such as uninsured motorists (UM) and underinsured motorists (UIM).

With a serious injury collision, it’s easy to max out the minimum liability limits very quickly. However, most cases will resolve for the insured’s policy limits unless there are exceptional circumstances. For example, maybe the defendant has enough personal assets to cover the accident . Another example can be if multiple parties can contribute to the settlement, or there is a bad faith allegation against your insurance company.

Types of Injuries That Often Exceed Insurance Policy Limits

Some types of injuries are prone to exceeding the available policy limits—even in higher liability coverage situations. Common examples include:

  • Traumatic brain injuries;
  • Spinal cord injuries, including paralysis;
  • Other spinal injuries such as herniated discs requiring surgery;
  • Accidents involving motorcycles or large trucks; and
  • Other catastrophic injuries.

With the cost of medical treatments and insurance policies rising, the value of car accident claims can easily exceed policy limits. Catastrophic injuries aren’t the only claims that typically exceed policy limits. 

How to Collect the Full Value of Your Car Accident Claim

Depending on the circumstances, you may have the ability to pursue compensation beyond the at-fault driver’s liability coverage. Possible options include the following.

Multiple At-Fault Parties

If multiple parties are at fault for your accident, you may be able to recover from more than one insurance policy. For example, if the defendant was working for a delivery company, it may be possible to collect from the driver’s insurance and the delivery company’s policy.

Umbrella Policy

Some people carry a general umbrella liability policy to protect themselves in situations such as this. Coverage under an umbrella policy won’t be triggered until all other available policies have paid out their limits. You’re more likely to find an umbrella policy with corporate defendants, but some individuals also have them.

Suing Beyond Policy Limits  

There is no legal obligation for you to settle your case. You can try to sue the defendant personally for the amount above their insurance limits. However, you are on your own to collect the judgment. The court will not assist you directly with this. Often, a defendant can fall in a category known as “judgment proof.” This term means they don’t have any personal assets to satisfy the remaining amount owed. Suing the defendant for the remaining amount only makes sense if they are very wealthy or have additional insurance policies that might apply to the accident.

To satisfy any personal judgment beyond the policy limits, you need to try to get a judgment lien to seize assets or property to satisfy the award. Even if you get a lien, it doesn’t mean the defendant will automatically pay.

Underinsured Motorist (UIM) Coverage

If you carry underinsured motorist coverage (UIM) on your insurance policy, you have an option to file a claim if the at-fault driver’s policy limits aren’t enough to cover your damages. Your insurance company will treat your case as a third-party liability matter, investigating your injuries and damages. They will not automatically pay out your limits just because the other driver’s insurance company did.

In cases where your damages are significantly greater than the third-party liability limits, the other driver’s insurance company may choose to tender limits early on. For example, consider a situation where you are presenting a demand for $75,000. If the at-fault driver only has $25,000 bodily injury limits, then the insurance company may offer $25,000 early on in the claims process. The reason for that is because their investigation reveals your claim is worth over their insured’s limits, so it doesn’t make sense to keep the claim open longer.

Allegations of Bad Faith

If there’s a chance that the insurance company engaged in any deceptive behavior or acted in bad faith, you might have a chance to get additional compensation above policy limits. However, this will only apply in first-party cases such as UM or UIM. Alabama doesn’t recognize third-party bad faith claims. 

Insurance companies sometimes commit bad faith, but many accident victims do not realize they have an additional claim. Bad faith in this situation means your insurance company is not reasonably settling your claim within the available policy limits. Examples of bad faith include:

  • Not issuing payment in a timely manner;
  • Failing or refusing to investigate a claim in a proper and timely manner; and
  • Not providing a reasonable and timely explanation for the denial of your claim.

If a claim exceeds the policy limits and the insurance company has engaged in bad faith, filing a lawsuit might allow you to collect the additional compensation above the policy limits.

Bad faith claims are complicated, which is why you need a skilled Birmingham car accident lawyer representing you. When we review your claim, we can determine whether your insurance company has engaged in any bad faith practices.  

Contact a Birmingham Car Accident Lawyer

If another driver caused an accident that left you with serious injuries, don’t attempt to handle your claim on your own. Let the experienced team at Fob James Law Firm, LLC help. We have years of experience representing clients like you whose claim is valued higher than the available policy limits. To learn more about how we can assist you, contact our office today to schedule an initial consultation.

Author Photo

Fob H. James, IV

Fob James obtained a B.S., in software engineering from Auburn University and then continued his education by getting his J.D. from Vanderbilt University School of Law. After working for a large regional firm for several years where he obtained awards for both individual and corporate clients, Fob found that his passion was fighting for individuals who have been seriously injured or wronged by others. Fob believes that the jury is the great equalizer to the power and influence that large corporations have in society.