Policy limits demand bad faith attorney

A policy limits demand is a written offer to release an insured defendant in exchange for payment of the full available liability coverage. Its purpose is narrow and its consequences are large: it puts the carrier to an election, and it creates the record that decides, years later, whether a verdict above limits becomes the carrier’s problem or stays the defendant’s. A demand that is clear, documented and capable of acceptance shifts risk. A demand that is vague, conditional or unsupported does not, however strongly it is worded. Law Offices Of SRIS, P.C. has practiced since 1997 and handles injury and coverage matters in Virginia, Maryland, the District of Columbia, New Jersey and New York. To discuss a demand or a carrier’s response to one, reach our location at (888) 437-7747.

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What the demand is for

Two things, and they are separable. The first is settlement: the injured claimant would rather have the limits now than a judgment later. The second is preservation. If the carrier refuses and the case is tried to a verdict above the limit, the refusal becomes the central fact in any later claim that the insurer failed to protect its own insured.

That second purpose is why the document is drafted with a future reader in mind. The eventual audience is not the adjuster. It is a judge assessing whether a reasonable insurer, holding the information the carrier held on the date of the demand, would have paid.

What a demand has to contain to do its work

Carriers defend excess-verdict claims by attacking the demand, so the elements matter more than the tone.

Identification of the coverage. The demand should name the policy and the limit being demanded. Where limits are unknown, it should record the request for disclosure and any refusal or non-response.

Documentation. Medical records and bills, wage-loss proof, and any imaging or treating-physician reporting that establishes the injury should accompany the demand or be identified as available. A carrier cannot fairly evaluate what it has not been shown, and a demand unsupported by records invites exactly that answer.

A release the carrier can actually buy. The demand should state plainly that payment of the limit will be exchanged for a full release of the insured. Conditions the carrier cannot control — resolution of liens on a particular timetable, agreement by a non-party, production of documents as a term of settlement — give it grounds to say the offer was never capable of acceptance.

A response period that is reasonable on the facts. Time-limited demands are common and often appropriate, but a period short enough to prevent meaningful evaluation weakens the record rather than strengthening it. What is reasonable depends on how much documentation accompanies the demand, whether liability is contested, and whether the carrier has had earlier notice of the claim.

Proof of delivery. Send in a form that establishes both dispatch and receipt, and address it to the adjuster of record and to defense counsel where counsel has appeared.

Liens and the mechanics of a limits settlement

A limits demand cannot be drafted without knowing what will be claimed out of the proceeds. Health plan reimbursement rights, hospital liens, medical payments or personal injury protection reimbursement, and government-program recovery rights each operate under their own rules, and some are asserted long after settlement. Identifying them before the demand allows the release language and the distribution to be structured correctly. Discovering them afterwards can consume the recovery the demand was designed to secure.

How carriers respond, and what each response means

An acceptance ends the matter as to that insured, subject to release drafting and lien resolution. A counter-offer below limits is an evaluation dispute, and the file should record the basis given for it. A request for extension is ordinarily worth granting where the reason is substantive, because refusing a reasonable extension is itself something a court can weigh. Silence is the response that most often produces later litigation, and it should be documented rather than merely noted.

A refusal accompanied by a reservation of rights, a coverage question, or a competing-claimant problem raises a different set of issues. Where multiple claimants compete for a single limit, a carrier may have grounds to attempt a pro-rata resolution or seek interpleader, and the analysis of whether it acted reasonably changes accordingly.

When a refusal becomes actionable

Refusing a limits demand is not misconduct. Insurers are entitled to contest claims they believe are defensible, and a verdict above limits does not by itself establish that a refusal was wrong. Every state in which the firm practices applies some duty on a liability insurer that controls the defense, but the labels and thresholds differ, and some require conduct beyond negligence.

What the analysis turns on is the carrier’s own file measured against the demand. Its reserve history, adjuster evaluations and defense counsel reporting are the evidence. Reserves set at the limit while the limit was being refused are hard to square with a claim of genuine doubt about value. So is a failure to warn the insured that a judgment above coverage was a realistic outcome, since that warning is what allows a policyholder to consider contributing personal funds or retaining separate counsel.

Available insurance coverage

Before any demand goes out, the coverage picture should be mapped rather than assumed. There may be an umbrella or excess layer above the primary policy, a commercial policy triggered because a driver was working, a resident-relative policy, or coverage arising from a permissive-use provision. On the claimant side, underinsured motorist coverage may respond to a shortfall between the limit demanded and the value of the claim, and medical payments or personal injury protection benefits may already have paid part of the loss and generated reimbursement rights. Declarations pages, complete policy forms including endorsements, and excess-layer documentation 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 is a policy limits demand?

A written offer to settle a claim for the full amount of the liability coverage available, in exchange for releasing the insured from further liability. It is used both to resolve the claim and to create a record of the carrier’s decision, because a refusal followed by a verdict above the limit is the factual foundation of any later claim that the insurer failed to protect its policyholder.

How long should I give the insurer to respond?

Long enough that a reasonable insurer could evaluate what was sent. That depends on how complete the accompanying documentation is, whether liability is genuinely contested, and how long the carrier has already had notice of the claim. A period too short to permit evaluation tends to undermine the record rather than protect it, and a reasonable request for more time is usually better granted than refused.

What happens if the insurer ignores the demand?

Silence is treated as a refusal for practical purposes, and it is often the worst response from the carrier’s standpoint because it leaves no stated reason for declining. The file should record dispatch, receipt and the expiry of the response period. If the case is then tried and the verdict exceeds the limit, the unanswered demand becomes central evidence.

Can conditions be attached to a limits demand?

They can, but each condition is a point the carrier may later argue made acceptance impossible. Terms the insurer cannot control — a lien resolved on a fixed timetable, cooperation from someone who is not a party, document production as a condition of payment — carry the most risk. A demand that simply exchanges the limit for a release of the insured is the hardest version to attack.

What if there is more than one injured claimant and one policy?

Competing claims against a single limit change the analysis. The carrier may seek to allocate the limit among claimants or ask a court to distribute it, and a refusal to pay one claimant the whole limit may be reasonable in that setting. Anyone making a demand in a multiple-claimant case should know how many claims are pending and how the carrier is treating them.

Does the insured defendant have any role in this?

A significant one. The duty at issue is owed to the insured, and the insured is entitled to be told when exposure above the limit is realistic. A policyholder who receives that warning can consider contributing personal funds, retaining separate counsel, or pressing the carrier to accept. A policyholder who is never told loses those options, and the omission is itself relevant.

Do I need to know the policy limits before demanding them?

It helps considerably, and disclosure obligations vary by state. Where limits have not been disclosed, the demand should record that disclosure was requested and what response was received. Do not assume a limit; a demand aimed at the wrong number is easier for the carrier to characterize as something other than a limits demand.

Is a rejected demand still useful?

Yes, provided it was properly documented. Its value after rejection is evidentiary. It fixes what the carrier knew, what it was offered, what it was given to evaluate, and what it decided. That record is what a court examines if a verdict later exceeds the coverage, and it is the reason these letters are drafted as carefully as pleadings.

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

A demand governs what happens after it is refused, and the response period is only one of the deadlines running. Request a consultation. Reach our location at (888) 437-7747. Consultations are by appointment.

Last reviewed: August 24, 2026.

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