Why Do Attorneys Send Policy Limit Demand Letters

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What Alistair didn’t understand, and what many of my clients in San Diego don’t realize, is the strategic purpose behind a policy limit demand letter. It’s not simply about asking for the most money possible; it’s about initiating a specific process designed to protect your rights and maximize your recovery. The insurance adjuster’s low-ball offer was simply the opening salvo in a much larger negotiation.

Sending a policy limit demand letter—essentially a formal notice stating you believe the claim is worth the defendant’s insurance policy’s maximum coverage—is a critical step in pursuing a personal injury claim. It serves multiple functions, and it’s a tactic I’ve refined over 13+ years of practice here in San Diego. Having been trained by a former insurance defense attorney, I intimately understand how these letters are evaluated, often devalued, and sometimes outright rejected—and how to anticipate and counter those strategies.

Why Do Insurance Companies Ignore Policy Limit Demands?

The insurance company’s initial response – or lack thereof – to a policy limit demand can be frustrating. They are often trained to initially undervalue claims. It’s a tactic to see if you’ll settle for a fraction of what your case is actually worth. They’re hoping you’re unaware of your rights or intimidated by the process. Receiving no response or a low-ball counteroffer is, unfortunately, the norm. Don’t take it personally; it’s business.

Several factors contribute to this behavior. First, adjusters are incentivized to pay out as little as possible. Second, they’re hoping you haven’t yet retained legal counsel. Third, they’re assessing the strength of your claim, gathering evidence, and strategizing their defense. A policy limit demand forces them to take you seriously, to fully investigate, and to potentially expose their insured to personal liability if the policy limits are inadequate.

Ignoring the demand isn’t a refusal to pay, but a delay tactic. It’s intended to wear you down, push you into accepting a smaller settlement out of desperation, or even allow the statute of limitations to run. That’s why it’s crucial to consult with an experienced attorney as soon as possible after an accident.

What Happens After Sending a Policy Limit Demand Letter?

A well-drafted policy limit demand letter isn’t just a request for money; it’s a detailed presentation of your case. It outlines the facts of the accident, establishes liability, documents your injuries, quantifies your damages (medical bills, lost wages, pain and suffering), and cites the relevant legal principles. Importantly, it clearly states that you are prepared to file a lawsuit if a fair settlement isn’t reached.

Once the insurance company receives this letter, they have a duty to investigate your claim in good faith. They’ll likely request medical records, police reports, and witness statements. They may also ask you to submit to an Independent Medical Examination (IME)—CCP § 2032.220 outlines the parameters of these examinations—and will evaluate your credibility.

This is where having an attorney is invaluable. I can expertly navigate these requests, protect your rights, and ensure that the insurance company doesn’t take advantage of you. I am skilled at preparing responses to their requests for information, gathering additional evidence, and building a compelling case for maximum recovery.

How Do You Know if You’ve Reached a “Policy Limit” Situation?

Determining whether a policy limit demand is appropriate requires a thorough assessment of your damages and the available insurance coverage. A “policy limit” situation arises when your total damages – including medical expenses, lost wages, pain and suffering, and future care costs – realistically exceed the defendant’s insurance policy limits. It’s not simply about the amount of the bills; it’s about the overall impact the injury has had and will continue to have on your life.

Insurance adjusters will often claim the policy limits are “sufficient” even when your damages far surpass that amount. They may use tactics like minimizing your pain and suffering or disputing the reasonableness of your medical expenses. They will also attempt to apply Civ. Code § 1714 to assign comparative fault. A skilled attorney understands these tactics and can effectively counter them.

Ultimately, the decision to send a policy limit demand should be made in consultation with an experienced personal injury attorney who can provide an honest and realistic assessment of your case.

What if the Policy Limits are Not Enough?

If the defendant’s insurance policy limits are insufficient to cover your damages, you may have other options. These include pursuing a claim against the defendant’s personal assets, exploring coverage under your own insurance policies (such as uninsured/underinsured motorist coverage), or identifying other potentially liable parties.

In some cases, it may be necessary to file a lawsuit to recover the full amount of your damages. I have extensive experience litigating personal injury cases in San Diego and am prepared to aggressively represent your interests in court.

Filing suit also triggers discovery, which can expose additional assets and insurance coverage. This can be a crucial step in maximizing your recovery, especially in cases involving serious injuries.

What if the Insurance Company Refuses to Pay the Policy Limits?

If the insurance company refuses to pay the policy limits despite a strong demand letter and a clear liability, you may have grounds for a “bad faith” claim—Civil Code § 3333.4 allows for this claim. Bad faith claims arise when the insurance company acts unreasonably in investigating or handling your claim. They may be liable for additional damages beyond the original policy limits, including punitive damages.

These cases can be complex and require a thorough understanding of insurance law. An experienced attorney can evaluate your case, determine whether a bad faith claim is appropriate, and aggressively pursue your rights. Don’t hesitate to seek legal counsel if you suspect the insurance company is acting in bad faith.