How to “pop a policy” in a California personal injury case

By Eric Ganci

This question comes in many times with California personal injury cases: if I’m injured from someone else (like in a car accident or car crash), can I get more compensation than the Defendant’s policy limit? The answer usually in the law is “it depends”…or “well [pause] it depends.”

Here’s how this can play out: You’re driving. A Defendant Driver crashes into you, at no fault of your own. You’re badly injured, and Defendant Driver has a 100/300 policy where it could cover 100,000 per individual in a crash like this, or 300,000 for the total crash if multiple people are injured.

Well, what if your medical bills exceed that 100k? What if you value your pain and suffering loss of enjoyment of life (not to mention other claims like lost wages) exceeds that 100k? Can you try to gain an amount over Defendant’s Insurance policy limit?

Yes, California law allows you to try and recover above the policy limits, but California also requires certain notice procedures. All this is embedded with an insurance company’s duty “implied covenant” to not act within “bad faith”, where Implicit in every insurance policy is a duty to act fairly and in good faith in handling its insureds’ claims. See the California Supreme Court decision Gruenberg v. Aetna Ins. Co. (1973) 9 C3d 566, with the direct quote: “the duty of good faith and fair dealing on the part of defendant insurance companies is an absolute one.”

Ok, but must you demand Defendant’s full policy limit to invoke this duty to act fairly? The answer is no. You need only make a reasonable settlement offer within their policy. Again, straight from Gruenberg: “an insurer … who refuses to accept a reasonable settlement within the policy limits in violation of its duty to consider in good faith the interest of the insured in the settlement, is liable for the entire judgment against the insured even if it exceeds the policy limits.” Emphasis added.

So a rejected reasonable offer within Defendant’s policy can take the lid off Defendant’s policy (pop the policy, open the policy) and make the Defendant Insurance Carrier liable for a verdict at trial above their policy limit.