Policy limits, and what happens when there is not enough
The most painful conversation in injury practice is explaining that a claim is worth far more than anyone will ever pay for it, because the person who caused it carried a minimum policy. Here is how that works, and the narrow circumstances in which the limit stops being the ceiling.
The limit is a ceiling, not a valuation
A liability policy pays up to its limit and no further. If the at-fault driver carries California's minimum of $30,000 per person and your damages are $400,000, that policy pays $30,000.
In theory the person remains personally liable for the rest. In practice, somebody who buys the minimum policy usually has nothing collectable, and pursuing them produces a judgment rather than money. Honest advice about collectability matters more than an impressive judgment nobody can enforce.
The converse is also true: a $1 million policy does not mean a case is worth $1 million. It means the limit will not be the constraint.
Finding every layer
When a claim exceeds the obvious policy, the most valuable work is usually the search for more coverage rather than the negotiation.
- Umbrella and excess policies. Frequently not volunteered. They sit above the primary policy and can be many times larger.
- Other at-fault parties. A second driver, a vehicle owner who lent the car, a property owner, a contractor, a public entity. Each brings its own insurance.
- An employer. If the at-fault driver was working, the commercial policy is in play and is usually far larger.
- Your own underinsured motorist coverage, which is offset rather than stacked in California — see UM and UIM claims.
- Resident relative coverage. You may be insured under a household member's policy without realising it.
- A product or premises defendant who contributed to the injury.
When the insurer becomes liable beyond its limit
This is the mechanism that occasionally breaks the ceiling, and it is worth understanding in outline.
A California liability insurer owes its own insured a duty of good faith and fair dealing. Part of that duty is to accept a reasonable settlement demand within the policy limit when liability is clear and the damages plainly exceed the limit — because refusing exposes its own policyholder to a personal judgment.
If an insurer unreasonably rejects such a demand and a judgment is later entered above the limit, the insurer may be liable for the excess. The insured's claim against their own insurer for that failure can be assigned to the injured person.
Your own insurer is different
In a first-party claim — uninsured motorist, underinsured motorist, your own medical payments coverage — your insurer owes the duty of good faith directly to you. An unreasonable denial or delay in paying a claim it knows is owed can expose it to damages beyond the policy, which is a lever that simply does not exist against the other driver's insurer.
Questions people ask
The other driver only had a minimum policy. Is that all I can get?
From that policy, yes. The work is finding other sources: umbrella or excess layers, other responsible parties, an employer if the driver was working, your own underinsured motorist coverage, or a household policy you may be covered under. That search is frequently worth more than the negotiation.
Can I sue the at-fault driver personally for the rest?
You can, and whether it is worth doing depends entirely on whether they have anything collectable. Someone who bought a minimum policy often does not, and a judgment that cannot be enforced is not a recovery. Honest advice about that is more useful than an impressive-looking judgment.
What is a policy limits demand?
A documented, usually time-limited offer to settle for the full policy limit, supported by the records and a liability analysis. It gives the insurer a fair opportunity to protect its own insured from a personal judgment. If the insurer unreasonably refuses and a larger judgment follows, it may become liable for the excess.
Related
Reviewed October 2026 by Simon Aziz Budhwani, Esq., the attorney responsible for this site. Legal statements here name the California code section they rely on, so you can check them rather than trust them. This is information about the law in general, not advice about your situation.
Find out where you stand.
Tell us what happened and we will tell you honestly whether you have a claim worth bringing, what it is likely to involve, and how long it tends to take. The review is free and there is no fee unless there is a recovery.