Exposure When a Lawsuit Exceeds Your Auto Policy Limits

Attorney Answer

The number in a lawsuit is not the number you owe. Get the papers to your insurer immediately, say nothing about the crash to anyone else, and know that California exempts a substantial part of what you own from any judgment.

First, the deadline that matters most is not a statute of limitations — it is the response date on the lawsuit papers you were served with. That date is short, and missing it can allow a judgment to be entered against you without the case ever being argued. Your insurer normally provides your defense, and it cannot do that if it does not have the papers.

On fault, running the stop sign is a serious fact against you, but it does not settle the whole case. Cal. Civ. Code § 1714(a) makes everyone responsible for injury occasioned to another by their want of ordinary care, "except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself or herself." California is a pure comparative fault state, which the California Supreme Court applied in Daly v. General Motors Corp., holding that a plaintiff's recovery is reduced only to the extent the plaintiff's own lack of reasonable care contributed to the injury. In a chain collision, the speed and following distance of the vehicle that struck you, and how each later impact happened, can shift a share of the responsibility away from you. That is an argument your defense lawyer makes with evidence, not something to concede at the outset.

Your insurer's obligation goes further than paying up to your limit. Under California law an insurer that unreasonably refuses to settle a claim within the policy limits can be held responsible for the entire judgment, including the part above the limits — the rule from Comunale v. Traders & General Ins. Co. That protection is real, and it depends on your insurer having the claim, having the chance to settle, and having your cooperation.

If a judgment is ever entered, California exempts property from collection. Cal. Code Civ. Proc. § 704.730 sets the homestead exemption at the greater of the countywide median sale price for a single-family home in the prior calendar year, capped at $600,000, or $300,000, adjusted annually for inflation — so this page will not print a figure, because it depends on your county and the year. Cal. Code Civ. Proc. § 704.010 exempts $7,500 in vehicle equity and related proceeds. California also limits what a creditor can collect from someone with little or no income, and being unemployed is directly relevant to that; the specifics are worth asking a lawyer about.

What you can do

1. Send the entire lawsuit packet — summons, complaint, and everything served with it — to your insurer today, and keep proof of when you sent it. Late notice is one of the few things that can cost you your defense.

2. Ask your insurer, in writing, to confirm that it is defending you, to confirm your liability limits, and to tell you whether you have any umbrella or excess coverage, including under a homeowner's or renter's policy.

3. Tell your insurer in writing that you want the case settled within your policy limits if a demand within limits is made.

4. Do not discuss the crash with the other side's insurer, lawyer or investigator, and do not write out your own account of what happened for anyone other than your own insurer or your own attorney. Keep the records that already exist.

5. If you receive a traffic citation or any police contact about the collision, speak with a local criminal-defense attorney before you answer questions.

6. Ask a local attorney how the exemptions in Cal. Code Civ. Proc. §§ 704.730 and 704.010 apply to what you own, and what a judgment creditor could actually reach while you are out of work. Most lawyers offer a brief initial call at no cost, and a few minutes on your specific facts with someone who handles these cases in your area is worth more than any general guidance, including this page.

⏱ Time limits apply. The urgent deadline is the court's response date on the papers you were served — that is measured in days, not years, and your insurer needs the papers now. Behind it, a claim against you for personal injury generally runs on Cal. Code Civ. Proc. § 335.1's two years and a claim for vehicle damage on Cal. Code Civ. Proc. § 338(c)(1)'s three years, and your policy carries its own notice deadlines. Which apply here, and when each started, depends on facts this page does not have. Have a local attorney review them immediately.