Excess verdict insurance bad faith lawyer

An excess verdict is a judgment larger than the insurance policy that was supposed to cover it. It matters because of what happened before the verdict, not after: in most excess-verdict cases the carrier had an opportunity to close the claim inside its limits and declined. The verdict converts that decision into a measurable loss, and the loss belongs in the first instance to the insured defendant, not to the injured plaintiff. Whether that loss can be recovered from the carrier depends on the standard the state applies to an insurer that refuses a settlement, and on how carefully the record before trial was built. Law Offices Of SRIS, P.C. has practiced since 1997 and handles injury and coverage matters across Virginia, Maryland, the District of Columbia, New Jersey and New York. To discuss an excess verdict, reach our location at (888) 437-7747.

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What an excess verdict actually is

The term describes arithmetic, not misconduct. A jury returns a number; the applicable liability policy contains a per-person or per-occurrence limit; the judgment exceeds it. The insurer pays its limit and its duty to indemnify ends there. The remainder is a personal judgment against the defendant, enforceable against assets, wages and property to the extent state exemption law allows.

That arithmetic is the starting point of a bad-faith analysis rather than its conclusion. Verdicts run over limits for ordinary reasons: a catastrophic injury against a minimum-limits policy, a sympathetic plaintiff, an unexpected liability finding. None of that implicates the carrier. What implicates the carrier is a documented chance to have paid less, earlier, and a refusal that no reasonable insurer would have made on the same information.

How an excess verdict creates a claim against the carrier

A liability insurer that controls the defense of a claim holds a position of trust. It selects counsel, directs strategy and decides whether to settle, while the consequences of a wrong decision fall on someone else. Every state in which the firm practices recognizes some version of the resulting duty, though the label and the threshold differ. Some frame it as an implied covenant of good faith and fair dealing; some as a duty to give the insured interests at least equal consideration to its own; some require conduct beyond mere negligence.

The practical test is closer to a factual reconstruction than a legal formula. What did the carrier know about liability, and when. What did its own adjuster and defense counsel report about the likely verdict range. Was there a demand inside limits that a reasonable insurer would have accepted. Did the carrier tell the insured that a judgment above limits was a realistic outcome, so the insured could consider contributing personal funds. An excess verdict where the file shows a clear-liability case, an in-limits demand and an internal evaluation above the limit is a very different matter from one where liability was genuinely contested until the moment of the verdict.

Why the claim begins as the defendant insured’s

This is the structural feature that surprises people most. The bad-faith cause of action arising from an excess verdict generally belongs to the policyholder who was left exposed, not to the plaintiff who won the judgment. The plaintiff has a judgment; the insured has a grievance against the carrier that mishandled the defense.

The two are commonly joined by agreement. An insured facing a personal judgment they cannot pay may assign the bad-faith claim to the judgment creditor, often in exchange for a covenant limiting collection against personal assets. Whether such an assignment is enforceable, and on what terms, is a state-law question that has to be researched before anything is signed. Some jurisdictions permit assignment freely, some restrict it, and some scrutinise arrangements that look collusive — a consent judgment entered without an adversarial trial, for instance, invites a defense that the number was never tested.

What the carrier will argue

Insurers defend these cases along predictable lines, and each line is met with documents rather than argument.

The first is that liability was reasonably disputed, so declining to pay limits was a defensible judgment call. The answer is the carrier’s own file: adjuster round-table notes, reserve entries, counsel evaluations. Reserves set at or near the policy limit while limits were being refused are difficult to reconcile with a claim of genuine doubt.

The second is that no proper demand was ever made — that the plaintiff never offered to release the insured for the available limit, or attached conditions the carrier could not meet within the time allowed. This is why the form and clarity of the pre-trial demand often decide the case years later.

The third is that the insured suffered no compensable harm because the judgment will never actually be collected. The response depends on state law: some jurisdictions treat the entry of the judgment itself as the injury, others require payment or a realistic collection threat.

The fourth is that the file is privileged. Claims-handling records are usually discoverable in a first-party bad-faith action notwithstanding the carrier’s objection, but the scope is litigated, and a protective order is normal.

What the record needs to contain

Cases of this kind are won and lost in the underlying liability file, which means the important work often happens before anyone is thinking about bad faith. A demand should identify the policy and the limit being demanded, enclose the medical and wage documentation supporting the number, release the insured on payment, and set a response period that is long enough to be reasonable on the facts. Correspondence should be sent in a form that establishes receipt. Any statement by the carrier or its counsel about valuation should be confirmed in writing.

After the verdict the file itself becomes the evidence: the complete claim file, the underwriting file, reserve history, internal authority requests, communications between the carrier and defense counsel, and any communications warning the insured about exposure above limits. Preservation letters should go out promptly, because retention schedules are not written with this litigation in mind.

Available insurance coverage

An excess verdict often reveals coverage nobody looked for. Beyond the primary liability policy there may be an umbrella or excess layer, a commercial policy triggered because the driver was working, a resident-relative policy, or coverage under a permissive-use provision. On the plaintiff side, underinsured motorist coverage may respond to the shortfall independently of any bad-faith theory, and med-pay or personal injury protection benefits may already have paid part of the loss. Each of those possibilities is a document request, not an assumption. Declarations pages, full policy forms including endorsements, and any excess-layer certificates should be obtained and read against the facts.

Filing deadlines

Every injury claim is governed by a statute of limitations, and the periods differ by state and by claim type. For personal injury actions the period is two years in Virginia under Va. Code § 8.01-243(A), accruing at the date of injury; three years in Maryland under Md. Code, Cts. & Jud. Proc. § 5-101; three years in the District of Columbia under D.C. Code § 12-301(8); two years in New Jersey under N.J.S.A. 2A:14-2; and three years in New York under N.Y. C.P.L.R. § 214(5). These are general periods. Discovery rules, tolling for minors and incapacity, claims against government entities — the District imposes a six-month notice-of-claim requirement for claims against the District government — and claim-specific statutes can shorten or extend them. Do not rely on a general period for your own case; have the deadline confirmed on your facts.

Frequently Asked Questions

What makes a verdict an excess verdict?

Only that the judgment exceeds the limit of the liability policy responding to the claim. It is an arithmetic description. A judgment of any size can be an excess verdict against a small policy, and a very large judgment is not an excess verdict if the coverage available is larger still. The term says nothing by itself about whether the insurer behaved improperly; that is a separate question answered by the claims file.

Who owns the bad faith claim after an excess verdict?

Generally the insured defendant whose personal assets are exposed, not the plaintiff who holds the judgment. The insured is the party to whom the carrier owed the duty. Plaintiffs frequently acquire the claim by assignment from the insured, often coupled with an agreement limiting collection efforts against that person, but whether an assignment is permitted and enforceable depends on the law of the state involved.

Does refusing a settlement demand automatically make an insurer liable?

No. Insurers are entitled to defend claims they believe are defensible, and an adverse verdict does not by itself establish that a refusal was improper. Liability turns on what the carrier knew when it refused, what its own evaluators told it, whether a reasonable insurer on that information would have paid, and the standard of conduct the applicable state requires.

Do I have to pay the judgment before I can sue the insurer?

That varies by jurisdiction. Some states treat entry of the excess judgment as the injury and permit the claim immediately. Others require that the insured has actually paid, or faces a genuine prospect of collection, before damages are considered established. This is one of the first questions to resolve, because it determines both timing and how a settlement with the judgment creditor should be structured.

Can the insurance company keep its claims file confidential?

Usually not in its entirety. In an action alleging that the carrier mishandled the claim, its own handling records are the central evidence, and courts commonly order production of the claim file, reserve information and internal evaluations. Communications with counsel retained for the bad-faith litigation itself stand on different footing. Expect the scope to be contested and a protective order to govern the material.

What is a consent judgment and why is it risky?

It is a judgment the defendant agrees to rather than one a jury returns, typically entered as part of an arrangement assigning the bad-faith claim to the plaintiff. It saves the cost of a trial, but it hands the carrier an argument that the amount was never tested by an adversary and should not bind it. Some courts accept properly documented consent judgments and require a reasonableness hearing; others are sceptical. The structure has to be built against the law of the specific state.

Does an excess verdict affect my own insurance going forward?

A judgment above limits is a matter of public record and may affect underwriting and renewal, and a personal judgment can be reported and enforced like other judgments. The firm does not advise on insurance purchasing, but anyone facing an excess judgment should get advice on asset exposure and exemption law in their state alongside the coverage question.

How long do I have to bring a bad faith claim?

The limitations period for a claim against an insurer is set by contract or tort law in the relevant state and is not the same as the period for the underlying injury claim. Accrual may run from the excess judgment, from its affirmance on appeal, or from payment, depending on the jurisdiction and the theory pleaded. Because the analysis is fact-specific, the deadline should be confirmed on your own facts rather than assumed.

About Mr. Sris

Mr. Sris is the owner and founder of Law Offices Of SRIS, P.C., which has practiced since 1997. He is a former prosecutor and is admitted in Virginia, Maryland, the District of Columbia, New Jersey and New York. Of Counsel attorneys contract directly with the firm and handle matters alongside him. In 2019 Mr. Sris testified before the Virginia House Courts of Justice Committee on House Bill 635.

Speak with Mr. Sris

An excess verdict starts clocks that differ from the ones in the underlying injury case, and the claims file that decides the matter is held by the other side. Request a consultation. Reach our location at (888) 437-7747. Consultations are by appointment.

Last reviewed: August 24, 2026.

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