What Does "Policy Limits" Mean in a New York Motor Vehicle Accident Case?
If you've been injured in a car accident or another incident caused by someone else's negligence, you may hear your attorney mention that the insurance company has "offered the policy limits" or that your case "settled for policy limits."
The phrase “policy limit” has a very specific legal meaning. Understanding what policy limits are—and why obtaining them is often an excellent result—can help you make informed decisions about your case.
What Are Insurance Policy Limits?
An insurance policy is a contract between the person who purchased the insurance and the insurance company. In exchange for paying premiums, the insurance company agrees to provide certain protections, including paying covered claims up to the limits set forth in the policy.
For example, if a driver carries a liability insurance policy with bodily injury limits of $100,000 per person, the insurance company generally agrees to pay up to $100,000 on behalf of its insured for injuries that driver legally caused. The insurance company is typically not contractually obligated to pay more than that amount for a single injured person, regardless of how serious the injuries may be.
The policy limit is not necessarily the value of the injury claim. Rather, it represents the maximum amount the insurance company is generally required to pay under its contract with its insured.
Does Accepting the Policy Limits Mean My Case Is Worth Only That Amount?
Not necessarily.
The value of a personal injury case depends on many factors, including:
The nature and extent of the injuries
Past and future medical expenses
Lost wages and diminished earning capacity
Pain and suffering
The impact the injuries have on the person's daily life
In some cases, the fair value of a claim may exceed the available insurance coverage. A person who suffers catastrophic injuries may have damages far greater than the at-fault driver's insurance policy.
The policy limits simply define the insurance company's contractual obligation—they do not automatically define the value of the claim.
Can I Sue the Other Driver for More Than the Policy Limits?
Yes.
Under New York law, an injured person generally has the right to pursue a lawsuit against the individual who caused the accident, even if the damages exceed the available insurance coverage.
If a jury determines that the injured person sustained damages greater than the available insurance limits, the judgment may exceed the amount paid by the insurance company.
However, obtaining a judgment and collecting that judgment are two different things.
Why Is Accepting the Policy Limits Often the Best Practical Outcome?
One of the realities of litigation is that many individuals simply do not have substantial personal assets beyond their insurance coverage.
Even if an injured person obtains a judgment for more than the available insurance limits, collecting the additional amount may be difficult—or, in some cases, impossible—if the defendant lacks sufficient income or assets.
For that reason, accepting the available policy limits is often the most practical resolution to a case.
It provides certainty. It allows the injured person to receive compensation without the delay, expense, and uncertainty that come with prolonged litigation.
Litigation Comes With Costs
Every lawsuit requires an investment of both time and money.
Depending on the circumstances, litigation may involve:
Depositions
Medical record collection
Expert witnesses
Court filings
Motion practice
Trial preparation
Trial itself
These expenses can be significant, and litigation often takes months or even years before reaching a final resolution.
That does not mean filing suit is the wrong decision. In many cases, litigation is necessary to obtain fair compensation. But when the available insurance coverage represents the most realistic source of recovery, accepting the policy limits can allow an injured person to avoid additional costs, delays, and uncertainty while still obtaining the maximum amount available from the insurer.
Every Case Requires an Individual Analysis
There is no universal answer to whether accepting a policy limits offer is the right decision.
Some cases warrant filing suit and pursuing a judgment beyond the available insurance coverage. Others may involve additional insurance policies, commercial defendants, employers, or other responsible parties that increase the available recovery.
In other situations, accepting the policy limits may be the most efficient and financially sound course of action.
An experienced personal injury attorney can evaluate not only the value of the injury claim, but also the practical realities of collecting a judgment and whether additional sources of recovery may exist.
Questions About a New York Personal Injury Claim?
If you've been injured in an accident in New York, understanding the available insurance coverage is one of the first steps in evaluating your case. At Brendon Reyes Law, PLLC, we work with clients to assess the value of their claims, investigate all potential sources of recovery, and develop a strategy tailored to their individual circumstances.
Every case is unique, and every client deserves honest advice about both the legal and practical considerations involved in pursuing compensation after an injury.
