What to Do If You’re Sued for Damages Exceeding Your Auto Insurance Coverage
- Vincent Fuccilli
- 1 hour ago
- 4 min read
Bergen Insurance Group | Personal Umbrella Insurance Education
Getting into a car accident is stressful enough, but what happens if the damages you’re sued for go beyond your auto insurance limits? This situation can leave you facing serious financial risks. Understanding your options and how to protect yourself is crucial if you find yourself in this position.
Understanding Auto Insurance Limits and Lawsuits
Auto insurance policies have limits that define the maximum amount your insurer will pay for damages. These limits usually cover:
Bodily injury per person
Bodily injury per accident
Property damage
If the total damages from an accident exceed these limits, the injured party can sue you personally for the remaining amount. This means your personal assets, such as savings, property, or future income, could be at risk.
For example, if your policy covers $50,000 for bodily injury but the medical bills and damages total $100,000, you could be responsible for the $50,000 difference.
What Happens When You’re Sued Beyond Your Coverage
When a lawsuit exceeds your insurance limits, your insurer will pay up to the policy limit, then you must cover the rest. The injured party may seek a court judgment against you, which can lead to:
Wage garnishment
Bank account levies
Property liens or forced sales
This can have a long-lasting impact on your financial stability.
Real-Life Example
Consider a driver with $100,000 in liability coverage who causes a severe accident. The injured party’s medical expenses and damages total $250,000. The insurance company pays $100,000, but the driver is sued for the remaining $150,000. If the court rules in favor of the injured party, the driver must pay the $150,000 out of pocket or risk wage garnishment.
Steps to Take If You’re Sued for More Than Your Auto Insurance Limits
1. Notify Your Insurance Company Immediately
Your insurer should be informed right away. They will typically provide legal defense and may negotiate settlements on your behalf. However, their obligation ends once the policy limits are exhausted.
2. Consult a Qualified Attorney
Hire an attorney experienced in auto accident and insurance law. They can:
Review the lawsuit and your policy
Negotiate with the plaintiff or their attorney
Help protect your assets and rights
3. Review Your Financial Situation
Assess your assets and income to understand what could be at risk. This will help your attorney develop a strategy to protect your finances.
4. Consider Settlement Options
Sometimes settling for less than the full amount is possible. Your attorney can negotiate a payment plan or reduced settlement to avoid a court judgment.
5. Explore Additional Insurance or Protection
If you haven’t already, consider purchasing umbrella insurance. This type of policy provides extra liability coverage beyond your auto insurance limits, offering protection against large claims.
How to Avoid Being Sued for More Than Your Coverage
Prevention is key. Here are ways to reduce your risk:
Increase your liability limits: Higher limits mean better protection.
Add umbrella insurance: This covers claims beyond your auto policy.
Drive safely and responsibly: Avoid accidents and lawsuits.
Keep good records: Documentation can help in disputes.
Example of Umbrella Insurance in Action
A driver with $100,000 liability coverage causes an accident with $300,000 in damages. Their umbrella policy adds $1 million in coverage, so the insurance pays the full amount. The driver avoids personal financial loss.
What to Expect During the Lawsuit Process
Filing the lawsuit: The injured party files a claim in court.
Discovery phase: Both sides exchange information.
Settlement talks: Often happen before trial.
Trial: If no settlement, a judge or jury decides.
Judgment: Court orders payment if you lose.
Your insurance company will handle your defense until your coverage limit is reached. After that, your attorney will guide you through the process.
FAQs
What happens if a lawsuit exceeds my auto insurance limits?
Depending on the situation, you may potentially become personally responsible for damages above your auto insurance liability limits.
Does umbrella insurance help after serious auto accidents?
Possibly. Personal umbrella insurance may help provide additional liability protection above underlying auto insurance limits depending on the policy structure and type of claim involved.
Can future wages or assets be at risk after a lawsuit?
Potentially. Large liability lawsuits may sometimes create financial exposure involving personal assets or future income depending on the legal outcome and available insurance coverage.
Why do families with teen drivers often consider umbrella insurance?
Teen drivers may increase household liability exposure because serious accidents involving inexperienced drivers may sometimes lead to substantial injury claims or lawsuits.
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Disclaimer
The information provided in this article is intended for general informational purposes only and should not be interpreted as insurance, legal, or financial advice. Coverage availability, exclusions, liability limits, legal outcomes, and policy structures vary by insurance company and individual situation. Please contact Bergen Insurance Group to review your specific liability insurance and umbrella coverage needs.
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