The insurance company has been dragging its feet for months. Medical bills pile up. Your injuries are serious. You know the at-fault driver has $100,000 in coverage, and your damages clearly exceed that.
A policy limits demand letter can change everything. Done correctly, it forces the insurer’s hand and creates leverage that transforms negotiations.
What a Policy Limits Demand Does
A policy limits demand is a formal letter to the at-fault driver’s insurance company demanding payment of the full available policy limits to settle your claim. But it’s more than just asking for money, it’s a strategic move that creates specific legal consequences.
When damages clearly exceed policy limits, the insurer faces a decision: pay the full limits now, or risk exposing their insured to personal liability for any judgment above those limits.
Georgia law creates duties on insurers to consider their insured’s interests when evaluating claims. An insurer that refuses a reasonable limits demand to protect its insured may face bad faith liability.
The Holt Framework
The Georgia Supreme Court’s decision in Holt v. State Farm established the framework for policy limits demands and insurer obligations. While the case involved first-party UM claims, its principles influence third-party demands as well.
Under Holt principles, when an insurer receives a valid policy limits demand with a reasonable time to respond, the insurer must evaluate whether the demand should be accepted. Failing to accept a reasonable demand that would protect the insured from excess judgment exposure can constitute bad faith.
The insurer’s primary obligation is to its insured, the policyholder who paid premiums. But that obligation requires the insurer to seriously consider opportunities to settle claims within policy limits.
Elements of an Effective Demand
A policy limits demand must be clear, complete, and give the insurer a reasonable time to respond.
State the demand amount unambiguously. “We hereby demand payment of the full policy limits of $100,000 to settle all claims arising from this accident.”
Provide a specific deadline. Georgia courts have found various time periods reasonable depending on circumstances. Thirty days is common. More complex situations might warrant longer periods. Too short creates arguments that the demand was unreasonable.
Include all information the insurer needs to evaluate the claim. Medical records and bills documenting injuries and treatment, evidence of liability such as police reports and witness statements, documentation of lost wages and other economic damages, and any other information relevant to damages.
The demand should be complete enough that the insurer can evaluate whether settlement makes sense without requesting additional information that would extend the deadline.
Time-Limited Demands
Time limits create urgency and define the window for acceptance. Once the deadline passes, the demand expires, and you’re free to pursue litigation without a standing settlement offer.
The time limit must be reasonable. What’s reasonable depends on claim complexity, available information, and what the insurer already knows about the case. Courts evaluate reasonableness based on whether the insurer had adequate opportunity to investigate and respond.
Extension requests from insurers require strategic decisions. Granting extensions may be reasonable in some cases. In others, it allows delay tactics that benefit only the insurer.
Information and Cooperation Requirements
Demands often include requirements for the insured’s cooperation, such as disclosure of all applicable coverage and policy limits. Georgia’s failure to include such requirements can create arguments that the demand was incomplete.
Request confirmation of policy limits. While insurers don’t always disclose limits voluntarily, many demands include conditional language: “This demand assumes limits of at least $100,000. If limits differ, advise immediately.”
Request disclosure of other applicable coverage. Other policies might provide additional layers of protection through umbrella coverage or excess policies.
What Happens After the Demand
If the insurer accepts within the deadline, the case settles for policy limits. Releases are exchanged, and payment follows.
If the insurer rejects or fails to respond by the deadline, litigation typically follows. The rejected demand becomes evidence of the insurer’s failure to protect its insured.
In trial, if the verdict exceeds policy limits, the insured faces personal liability for the excess. That insured may then have claims against their own insurer for failure to settle when the opportunity existed.
Bad Faith Setup
Policy limits demands create records that may support bad faith claims later. If the insurer unreasonably refused a clear opportunity to settle within limits, and a judgment exceeds limits, the insured can pursue their insurer for the excess.
These claims can be assigned. An injured plaintiff might accept an assignment of the insured’s bad faith claim as part of settlement, particularly when the at-fault driver has few personal assets but their insurer acted badly.
The Stowers doctrine, while originating in Texas, reflects principles Georgia courts recognize: insurers that negligently or in bad faith fail to settle within limits expose themselves to liability for excess judgments.
Common Insurer Responses
Insurers respond to policy limits demands in predictable ways.
Acceptance resolves the claim. Most straightforward, least common in clear limits cases where both sides understand the injuries exceed coverage.
Counter-offers below limits are common. The insurer offers less than demanded, testing whether you’ll accept less. The counter doesn’t reset your deadline, it’s a negotiation attempt.
Requests for additional information or time are frequent. Evaluate whether the request is legitimate or delay tactic. Provide genuinely needed information if it strengthens your position.
Silence until deadline passes happens when insurers hope you’ll extend or that something will change. Track deadlines carefully and be prepared to file suit promptly if the demand expires.
Litigation After Rejected Demands
A rejected policy limits demand doesn’t guarantee success at trial. You still must prove liability and damages. But the demand creates a record that the insurer had an opportunity to resolve the case and chose not to.
Discovery in litigation may reveal the insurer’s internal evaluation. Claim files often show that adjusters recognized the claim’s value but chose to gamble on trial.
Georgia’s offer of settlement statute, O.C.G.A. Section 9-11-68, creates additional pressure through potential attorney fee shifting.
When Demands Make Sense
Policy limits demands work best when liability is clear, damages obviously exceed limits, medical treatment is substantially complete, and documentation is thorough.
They make less sense when liability is disputed, damages are uncertain or might fall within limits, or significant medical treatment continues.
Premature demands weaken your position. If you demand limits before documenting that injuries warrant full limits payment, insurers are more likely to reject.
Crafting an Effective Demand Letter
Structure matters. Begin with a clear statement that this is a policy limits demand with a specific deadline. Provide background on the accident and liability. Detail injuries, treatment, and prognosis. Document all economic damages. Include relevant medical records and bills as attachments.
Tone should be professional and factual, not aggressive or threatening. The letter creates a record, make it one that looks reasonable to a judge or jury evaluating whether the insurer should have accepted.
Send via methods that create proof of receipt, certified mail with return receipt, and email with read receipts.
Keep a copy of everything. The demand letter and proof of delivery become evidence if the case proceeds.
Policy limits demands involve strategic timing and specific legal requirements that vary by case. This article provides general information about demand letter practices in Georgia personal injury cases. For specific guidance about whether and when to make a policy limits demand in your case, consult with an experienced Georgia personal injury attorney.