Who pays a verdict above the policy limits when the insurer refused to settle?
When a jury returns a verdict larger than the at-fault driver’s policy limits, the basic rule is that the insurer pays up to the limit and the insured is personally responsible for the rest. But that allocation can shift if the insurer unreasonably refused a chance to settle within the limits, because Georgia law can then hold the insurer responsible for the excess.
The default and the exception ¶
Ordinarily, an insurance policy caps the insurer’s payment obligation at the stated limit. A $25,000 bodily-injury limit means the insurer pays no more than $25,000 toward that injury, and any amount above it is the policyholder’s burden. That is simply how a coverage limit works.
The exception arises from the insurer’s duty to settle. Under Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992), an insurer that fails to give its insured equal consideration and unreasonably rejects a reasonable opportunity to settle within limits can be held liable for the entire judgment, including the portion above the policy limits. In effect, the insurer’s own unreasonable conduct can erase the protection the limit would otherwise give it.
How the excess shifts back to the insurer ¶
The pathway from an excess verdict to insurer responsibility generally involves these features:
- A reasonable chance to settle within limits existed, often shown by a within-limits demand the insurer rejected. Georgia regulates the form of such time-limited demands by statute, O.C.G.A. § 9-11-67.1.
- The insurer’s refusal was unreasonable given what it knew about liability and damages.
- The insured, left exposed to the excess, has a claim against the insurer for that exposure, which can sometimes be assigned to the injured party.
Without that misconduct, the insured bears the excess. With it, the insurer can be made to answer for the amount it could have avoided by settling. Georgia also recognizes a separate statutory penalty for an insurer’s bad-faith refusal to pay a covered claim under O.C.G.A. § 33-4-6, which can add a penalty and attorney fees on top of the underlying liability.
The bottom line ¶
A verdict above the policy limits normally leaves the insurer paying the limit and the insured owing the balance. Under Holt, however, an insurer that unreasonably refused a fair within-limits settlement can be held responsible for the entire judgment, shifting the excess back to the company whose conduct created the exposure.
This article is for general educational and informational purposes only and is not legal advice. It does not create an attorney-client relationship, and Georgia law may change. For advice about a specific situation, consult a licensed Georgia personal injury attorney.