How Often Do Auto Accident Settlements Exceed the Policy Limits in Texas?

If your damages exceed the at-fault driver’s insurance coverage, the insurance company will generally only pay up to the applicable policy limits. That does not necessarily mean you have no other options, but recovering compensation beyond those limits can be difficult and often depends on the facts of your case.

In Texas, auto accident settlements rarely exceed the available insurance policy limits because insurance companies are only obligated to pay up to the coverage amount. However, serious accidents involving catastrophic injuries, multiple victims, or significant property damage can result in damages that far exceed the insurance available. In those situations, it’s important to understand what happens next and whether there are other avenues for recovering compensation.

Because Texas has complex rules about collecting personal injury settlements over insurance limits, it’s important to discuss your case with an experienced auto accident attorney. They can explain the various legal remedies that may be available, such as filing a lawsuit against the at-fault driver, pursuing a claim under the Texas Stowers Doctrine, or identifying additional insurance coverage. This helps protect your rights and maximize your potential recovery.

What Happens If Accident Damage Exceeds Your Car Insurance in Texas?

When an auto accident settlement exceeds the available insurance policy limits, the insurance company will generally pay only up to the amount of coverage provided by the policy. If your damages are greater than those limits, the remaining balance may become the responsibility of the at-fault driver.

This situation is more likely to arise in accidents involving:

• Catastrophic injuries

• Permanent disabilities

• Multiple injured parties

• Extensive property damage

While every driver in Texas is required to carry liability insurance, the state’s minimum coverage requirements may not be enough to fully compensate someone who has suffered serious losses.

Texas Auto Insurance Policy Limits

Texas requires every automobile owner to purchase basic liability insurance. The Texas minimum liability limit for coverage is called a 30/60/25 policy. This coverage includes $30,000 for bodily injury to a single person, $60,000 for bodily injury for any one accident, and $25,000 in property damage coverage.

In cases where a claim exceeds Texas auto insurance policy limits, anything over that amount may be the policyholder’s responsibility.

Although many Texas drivers purchase higher liability limits, others carry only the minimum coverage required by law. When a serious accident causes damages well beyond those limits, accident victims may need to explore other potential sources of compensation.

Unfortunately, there are several reasons why it is often difficult for an accident victim to recover more than the at-fault driver’s applicable policy limits.

• First, any settlement a victim reaches with an at-fault driver’s insurance company will generally require the victim to release the at-fault person from further liability.

• A lawsuit seeking compensation beyond an at-fault driver’s policy limits is also unlikely to result in additional recovery unless the at-fault driver has substantial personal assets. This is especially true in Texas, where under the Texas Property Code, Sections 41.001, many of a person’s assets are exempt from collection to satisfy a judgment.

• Finally, Texas considers lawsuit judgments to be unsecured debt. Most judgments in Texas civil proceedings are also dischargeable through bankruptcy.

This means that even if a victim obtains a judgment against an at-fault driver, the driver may be able to discharge that judgment through bankruptcy proceedings. Because the judgment is generally considered unsecured debt, it would be among the last obligations paid in bankruptcy.

One important exception is the Texas Stowers Doctrine.

Can You Recover More Than the Insurance Policy Limits?

In most cases, an injured person cannot recover more than the available liability insurance simply because their damages exceed the policy limits. However, there are a few situations where additional compensation may be available.

For example, if the at-fault driver has significant personal assets, a lawsuit may allow you to pursue compensation beyond the insurance policy. In reality, however, many drivers who carry only minimum liability coverage do not have substantial non-exempt assets available to satisfy a large judgment.

There may also be additional insurance policies that apply to the accident. An umbrella liability policy, uninsured/underinsured motorist (UM/UIM) coverage, or another applicable insurance policy may provide additional compensation depending on the circumstances.

Finally, if an insurance company unreasonably refuses to settle a claim within the policy limits when it had the opportunity to do so, the Texas Stowers Doctrine may allow the insured to pursue the insurer for an excess judgment.

Stowers Doctrine in Texas

The Stowers Doctrine holds that an insurance company must use reasonable care when handling a policyholder’s claim. The Doctrine, stemming from the 1929 case G.A. Stowers Furniture Co. v. American Indemnity Co., plays a crucial role in cases where damages exceed the policy coverage. It serves as a form of protection against insurance company negligence, holding insurers accountable for failing to settle claims within policy limits when the opportunity to do so exists.

If an insurance company can reasonably settle a claim for an amount within the policy limits, the insurance company may be liable to the insured for any excess judgment if the claim fails to settle.

For instance, if the insurance policy has a limit of $50,000 and the insurance company turns down a $50,000 settlement demand, the insurer may become liable for any judgment entered in excess of $50,000. This legal framework encourages insurance companies to carefully evaluate reasonable settlement demands and act in the best interests of their policyholders.

Also, the Stowers Doctrine has been very helpful in promoting fairness in Texas settlement negotiations. For victims, this principle provides another potential avenue for recovery when an insurer has failed to act reasonably under the circumstances.

Since, with rare exceptions, the at-fault driver’s liability policy limits an auto accident victim’s recovery, your best action after an auto accident is to speak with an attorney. An experienced auto accident lawyer can evaluate whether the Stowers Doctrine or another legal strategy may apply to your case.

Umbrella Policy

An umbrella policy provides additional liability coverage beyond the limits of standard auto insurance. In Texas, this policy is especially useful for those who were involved in an accident as well as those who caused it. Here’s how umbrella policies can protect against exceeding policy limits:

• Additional Coverage: The additional liability coverage is usually in the region of $1 million and up, and this is enough to protect one in cases of high risk cases. This gives a high level of protection in cases where a lot of money is at stake. Some of the features that can be adjusted include the limit which can be as high as a certain value to meet or cover such claims or liabilities.

• Broader Protection: They can cover claims beyond auto accidents, other personal liability includes homeowners or renters insurance, and many others. Some policies also include the legal expenses that are liable in defending liability claims thus providing an added reassurance.

• Peace of Mind: For drivers with significant assets, these policies offer financial security in high-stakes accidents. This is the knowledge that one’s wealth and estate would not be at risk in a lawsuit, which is quite comforting.

How Umbrella Policies Work in Real-Life Scenarios

For instance, if the standard auto insurance of the at-fault driver is $100,000 and the victim’s damages are $1 million, then the umbrella policy will be used to pay the remaining amount of $900,000. Also, in cases of multiple victim situations, the umbrella policy can be used to fill the gaps left by the primary auto policy per accident limits. Considering that the umbrella policy requires additional premiums, it is something that should be considered by any person who has a lot of personal assets that need to be protected.

Besides protecting the policyholder, umbrella insurance can be very helpful to the victims of severe accidents to enable them to get adequate compensation for their losses. This is especially so when the traditional liability limits are insufficient as in the case of medical expenses, loss of earnings, and pain and suffering. This additional layer of protection is especially useful in cases of severe injuries where damages can easily go beyond the normal policy cover.

Who Should Consider an Umbrella Policy?

Umbrella policies are ideal for individuals and families with elevated liability risks. High-net-worth individuals benefit by safeguarding their wealth and assets from lawsuits that exceed standard insurance limits. Additionally, families with teen drivers could consider umbrella policies due to the higher risk of accidents involving inexperienced drivers.

Does the Insurance Company Have to Tell You the Policy Limits?

Many accident victims want to know how much insurance coverage the at-fault driver has available. In Texas, however, insurance companies are not generally required to automatically disclose liability policy limits at the start of a claim.

Depending on the circumstances, policy limit information may become available during the claims process or through litigation. An experienced attorney can often determine what insurance coverage may apply and identify other potential sources of compensation if the available liability limits are insufficient to fully cover your damages.

Contact Texas Car Accident Attorneys You Can Count On

If you or someone you care about was injured in an auto accident, please do not hesitate to contact us or call us at 832-966-7808 for a free consultation.

At Armstrong Lee & Baker LLP, our experienced auto accident attorneys have dedicated their careers to fighting for your rights. Our passionate advocates believe in carefully evaluating every case that comes through our door, and we never take a fee unless you win.

Scott Armstrong

Scott Armstrong is the Managing Partner and co-founder of Armstrong Lee & Baker LLP. Known for his strategic insight and relentless pursuit of justice, Scott personally guides the firm’s approach to complex cases, including catastrophic injuries, vehicle accidents, workplace injuries, and product liability. His leadership has created a culture where excellence, innovation, and dedication to client success are paramount, and his influence is evident in every case the firm handles, often resulting in hundreds of millions recovered for clients.

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