What Happens if a Crash Settlement Exceeds Insurance Policy Limits?
Most drivers in Arizona carry auto insurance because it’s required by law. But what happens if the settlement amount from your car accident case is more than the at-fault driver’s insurance policy covers? This situation is more common than many realize, especially in severe accidents that cause lasting injuries. Understanding your options can help you pursue full compensation instead of being left with unpaid bills. If you’re facing this scenario, speaking with an accident lawyer can make a significant difference in protecting your financial recovery.
Arizona’s Minimum Insurance Requirements
Arizona requires drivers to carry at least:
$25,000 for bodily injury per person
$50,000 for bodily injury per accident
$15,000 for property damage
These limits are often insufficient in serious accidents, particularly those involving spinal cord injuries, traumatic brain injuries, or permanent disabilities. Medical bills, rehabilitation, lost wages, and long-term care can easily exceed minimum coverage.
What Happens When Damages Are Higher Than the Policy?
If your settlement or verdict is larger than the at-fault driver’s policy limits, the insurance company is only obligated to pay up to those limits. For example:
The at-fault driver has $25,000 in bodily injury coverage.
Your medical bills and lost wages total $100,000.
The insurance company pays $25,000, leaving $75,000 unpaid.
At this point, you may need to explore additional avenues to recover the rest.
Options for Recovering Beyond Policy Limits
1. Uninsured/Underinsured Motorist Coverage (UM/UIM)
If you carry UM/UIM coverage, your own policy may step in to cover the difference. This coverage is especially valuable when the at-fault driver’s policy is too small to address your damages. It often applies in cases involving uninsured drivers or hit-and-run crashes.
2. Pursuing the At-Fault Driver Personally
You can seek to collect from the driver directly by going after personal assets. However, many drivers with low insurance limits don’t have substantial assets, which can make this option less effective.
3. Multiple Defendants
In accidents involving more than one negligent party—for example, a crash involving a rideshare driver and a commercial vehicle—you may be able to pursue compensation from multiple insurance policies.
4. Umbrella or Excess Policies
Some individuals and businesses carry umbrella policies that provide coverage above their standard auto policy limits. If available, these can be used to cover the excess damages.
Bad Faith Claims Against Insurance Companies
Insurance companies in Arizona have a duty to act in good faith. If an insurer refuses to settle a claim within policy limits when it reasonably could have, it may be held responsible for the entire judgment—even if it exceeds the policy. This type of action is called a bad faith claim.
For example, if you’re injured in a T-bone collision and the at-fault driver’s insurer ignores reasonable settlement offers, they could end up responsible for damages beyond the stated coverage.
How This Plays Out in Severe Injury Cases
In accidents involving catastrophic harm, the difference between coverage limits and actual damages can be massive. For instance:
A paralysis injury may result in lifelong medical expenses reaching millions.
A fatal accident settlement could include both economic losses and wrongful death damages far beyond minimum coverage.
These cases often require layered strategies, combining UM/UIM claims, third-party liability, and potential bad faith actions against insurers.
Protecting Yourself Before an Accident Happens
Since you can’t control how much coverage other drivers carry, your best protection is strengthening your own policy. Consider purchasing:
Higher liability limits to protect yourself from personal exposure
Uninsured/underinsured motorist coverage
Medical Payments (MedPay) coverage to handle immediate medical costs
Drivers in high-traffic areas like North Tempe and South Tempe are especially at risk of encountering underinsured drivers due to the density and diversity of road users.
Key Takeaways
Insurance companies only pay up to the policy limits of their insured.
You may still recover additional damages through UM/UIM coverage, personal asset collection, or umbrella policies.
Bad faith actions may force insurers to pay beyond stated limits in some cases.
Severe injury cases often require multiple approaches to secure full compensation.
Conclusion
When a crash settlement exceeds insurance policy limits in Arizona, recovering the full amount becomes more complicated. While insurers are generally only responsible for paying up to the limits of their policy, options like UM/UIM coverage, umbrella policies, multiple-defendant claims, and bad faith actions can help close the gap. Preparing ahead by carrying strong insurance coverage of your own is one of the best ways to protect against this common problem.
