insurance

Excess Judgment

A legal judgment against an insured person that exceeds their insurance policy limits, leaving them personally responsible for the amount above their coverage. This creates personal liability that the insurance company is not obligated to pay.

Example

“After causing a serious accident, the driver faced a $750,000 excess judgment because the court awarded $1.25 million in damages but his auto insurance only covered $500,000.”

Memory Tip

Think 'Extra Judgment = Extra Trouble' - it's the extra amount beyond your insurance that you must pay personally.

Why It Matters

Excess judgments can financially devastate individuals and families, potentially requiring them to sell homes, liquidate savings, or declare bankruptcy. Understanding this risk helps people make informed decisions about their insurance coverage limits and the need for additional protection.

Common Misconception

Many people assume their insurance company will always settle claims within policy limits to avoid excess judgments, but insurers are only required to pay up to policy limits and aren't automatically liable for amounts above that. The duty to defend and settle within limits has specific legal requirements that don't always protect the insured from personal liability.

In Practice

Jennifer had $100,000 in auto liability coverage when she caused an accident that severely injured a family of four. The total damages awarded by the jury were $850,000, creating a $750,000 excess judgment against her personally. Since her insurance company had offered to settle within the $100,000 limit but she had rejected reasonable settlement opportunities, she became responsible for the excess amount, ultimately forcing her to sell her home and file for bankruptcy to satisfy the judgment.

Etymology

The term developed in legal and insurance contexts during the 20th century, combining 'excess' from Latin 'excessus' meaning 'beyond limits' with 'judgment' from legal terminology.

Common Misspellings

exess judgmentexcess judgementexcess judgmintacces judgment

Related Terms

Personal Liability umbrella insurance

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