Protecting a Home From a Judgment Above Your Policy Limits

Attorney Answer

Your policy limit caps what your insurer pays. It does not cap what a court can order you to pay. But California exemption law does protect a substantial amount of home equity from a judgment, and there are steps that protect you now.

Start with what the policy is required to carry. Cal. Veh. Code § 16056(a) sets the minimum liability limits a California driver must have. For an accident in 2022, that floor was $15,000 for the injury or death of one person, $30,000 for the injury or death of more than one person, and $5,000 for property damage. Those minimums rose to $30,000, $60,000 and $15,000 for accidents on or after January 1, 2025. Many drivers carry exactly the minimum, which is why a serious crash can produce a claim larger than the policy. Anything above the limit is the driver's own exposure.

That is not the end of the story, because your insurer has obligations beyond writing a check up to the 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 portion above the limits — the rule from Comunale v. Traders & General Ins. Co. That protection is real, but it depends on your insurer knowing about the claim and having the chance to settle it, which is why prompt written notice matters more than anything else you will do this month.

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 calendar year before the claim, capped at $600,000, or $300,000, and that amount adjusts annually for inflation. A creditor cannot reach exempt equity. Because the figure depends on your county and the year, this page will not print a number for you. Cal. Code Civ. Proc. § 704.010 separately exempts $7,500 in vehicle equity and related proceeds.

What you can do

1. Send your insurer, in writing and the same day you receive it, every claim letter, demand, or lawsuit paper that arrives. Late notice is one of the few things that can cost you coverage outright.

2. Ask your insurer, in writing, to confirm your liability limits and whether you have any excess or umbrella coverage. Check any homeowner's or renter's policy for excess liability as well.

3. If a settlement demand arrives that is within your limits, tell your insurer in writing that you want it settled within the limits, and keep a copy of that letter.

4. Do not agree to pay anything, sign anything, or give a recorded statement to the other side or its insurer before you have talked with a lawyer.

5. Ask a local attorney how the homestead exemption in Cal. Code Civ. Proc. § 704.730 and the vehicle exemption in § 704.010 apply to what you actually own, and whether anything about your situation changes the analysis.

6. Ask that same attorney whether your insurer is defending you and whether you should have your own counsel alongside it. 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. 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. Your policy also carries its own notice and cooperation deadlines, which can be much shorter than either. When any of these started, and which of them apply, depends on facts this page does not have. Have a local attorney review the dates rather than counting from this page.