One of the most critical pieces of information for plaintiffs and their attorneys is the defendant’s insurance policy limits. Knowing the policy limits early in a case can shape strategy, settlement negotiations, and even decisions about whether to pursue litigation at all. However, discovering these limits is not always straightforward and involves a combination of legal rules, procedural tools, and strategic considerations.
This article explores the legal framework, practical approaches, and recent developments surrounding policy limit discovery in auto accident cases.
What Are Policy Limits?
Insurance Policy Limit Discovery refers to the maximum amount an insurance company is obligated to pay on behalf of its insured under a liability policy. In an auto insurance context, this often includes:
Bodily Injury Liability Limits (e.g., $100,000 per person / $300,000 per accident)
Property Damage Liability Limits (e.g., $50,000)
Umbrella or Excess Policies (which may offer additional coverage above standard limits)
For a plaintiff with significant damages, knowing whether the defendant has $25,000 or $1 million in coverage can fundamentally alter the approach to the case.
Why Policy Limit Discovery Matters
Informs Settlement Strategy: Plaintiffs may be more inclined to settle within policy limits if those limits are relatively low compared to damages.
Avoids Unnecessary Litigation: If the defendant has minimal insurance and no collectible personal assets, a plaintiff might choose not to pursue an expensive lawsuit.
Triggers Bad Faith Considerations: If an insurer refuses to settle a claim within policy limits when liability is clear, it may be exposed to a bad faith claim for any judgment exceeding those limits.
Guides Evaluation of Damages: Defense attorneys also use policy limits to frame negotiations and avoid exposing their clients to personal liability.
Is Disclosure of Policy Limits Required?
The answer depends on the jurisdiction. Laws vary by state, and courts have interpreted discovery obligations differently.
States That Require Disclosure
Some states mandate disclosure of insurance policy limits upon request and often early in litigation or even pre-suit:
California: Insurers must disclose limits under California Insurance Code § 791.13, and litigants can obtain the information during discovery.
Florida: Under Fla. Stat. § 627.4137, insurers must provide policy limits and coverage details within 30 days of a written request.
New York: As of January 2022, CPLR § 3101(f) requires disclosure of the defendant’s auto liability policy limits within 60 days of the filing of an answer.
States With Discretionary Disclosure
In some states, courts have discretion to allow or deny discovery of policy limits. Litigants may have to argue relevance or necessity:
Courts may require a showing that the amount in controversy is likely to exceed policy limits.
Opposing counsel may object, arguing that disclosure is premature or not reasonably calculated to lead to admissible evidence.
Federal Rules and Policy Limit Discovery
In federal court, Rule 26(a)(1)(A)(iv) of the Federal Rules of Civil Procedure requires parties to disclose:
“…any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment.”
This means defendants in federal auto accident cases must produce insurance information (including policy limits) as part of their initial disclosures, unless exempted.
How to Obtain Policy Limit Information
1. Pre-Suit Demand Letters
Many attorneys begin by sending a settlement demand letter to the insurance company, requesting:
- Policy declaration pages
- Statement of limits
- Information about umbrella or excess coverage
In states where pre-suit disclosure is required, this is often sufficient. In others cases, insurers may voluntarily comply to facilitate resolution and avoid litigation.
2. Interrogatories and Requests for Production
During formal discovery, plaintiffs can issue interrogatories or document requests seeking:
- The name of the insurer
- The full terms and limits of coverage
- Any excess or umbrella policies
Defense counsel may object, but courts often compel disclosure, especially when damages are significant.
3. Depositions of Insurance Adjusters or Defendants
If the information isn’t produced through written discovery, plaintiffs may depose:
- The defendant (about their understanding of insurance coverage)
- Insurance representatives or adjusters (if permitted)
Depositions can confirm policy limits and uncover how the insurer is evaluating the claim.
Obstacles and Common Defense Arguments
Insurers and defense attorneys may resist disclosing policy limits, citing:
- Privacy concerns
- Premature discovery before liability is established
- Relevance objections if damages are disputed
However, courts increasingly recognize that policy limits are highly relevant to settlement and trial strategy, particularly when a plaintiff faces substantial medical costs or loss.
Best Practices for Plaintiffs
Request Early: Ask for policy limits early and in writing to establish a record.
Use Statutory Tools: Cite applicable statutes or discovery rules in your jurisdiction.
Document All Communications: Retain proof of all requests and responses. This may be useful in a later bad faith claim.
Pursue Discovery if Necessary: If the insurer or defense refuses, be prepared to file a motion to compel with supporting case law and jurisdictional rules.
Policy Limits and Bad Faith Exposure
If an insurer refuses to settle within Policy Limit Discovery and the plaintiff secures a judgment above those limits, the insurer may face bad faith liability. This typically arises when:
Liability was clear.
Damages were substantial and exceeded the policy.
The insurer had an opportunity to settle but refused unreasonably.
Policy limit demands are often designed to create this potential liability for insurers who fail to protect their insured.
Recent Legal Trends
Greater Transparency: Many jurisdictions are moving toward mandatory disclosure of policy limits to promote fairness and efficiency.
Pre-litigation Bad Faith Claims: Courts have been more willing to recognize bad faith claims based on failure to settle, even when formal litigation has not yet begun.
Digital Discovery and Claims Portals: Some insurers now use secure online portals to transmit policy declarations and claims details, streamlining the process.
Conclusion
Policy limit discovery in auto accident cases is a crucial step for evaluating the value and viability of a claim. While some jurisdictions mandate disclosure, others require a more strategic and assertive approach. Whether through demand letters, discovery, or litigation, understanding and obtaining policy limit information is vital for effective representation and fair resolution.
Attorneys on both sides must be aware of the legal standards governing disclosure and act within ethical and procedural bounds. For plaintiffs, knowing the coverage landscape can be the difference between a modest settlement and a significant recovery, or between pursuing a case and walking away.
