When Damages Exceed Your Auto Policy Limits

Attorney Answer

Your policy limits cap what your insurer pays. They do not cap what you owe. A liability policy is a promise to pay up to a stated amount. If the other side's property damage is proved and it exceeds that amount, the difference is yours personally unless it is negotiated away or resolved another way. So the work now is to test the number, and to make sure your own insurer does its job.

Start with what California requires. Cal. Veh. Code § 16056(a) sets a floor for financial responsibility, not a ceiling on liability. For accidents before January 1, 2025, that floor was $15,000 for one person's injury, $30,000 for one accident, and $5,000 for property damage. For accidents on or after January 1, 2025, it is $30,000 / $60,000 / $15,000. Your accident falls under the earlier figures, and the property damage coverage you describe is above that floor. Carrying the minimum satisfies the state; it does not answer a claim.

What you actually owe is set by fault, not by your limits. Cal. Civ. Code § 1714(a) provides: "Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself or herself." In a collision involving several vehicles, responsibility is usually divided among the drivers rather than placed entirely on one of them, and a $40,000 figure is a claim, not a finding. Repair estimates, total-loss valuations and each driver's share are all open to challenge before anyone owes anything.

Your insurer owes you something here too. Under Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654 (1958), the California Supreme Court held that an insurer that unreasonably refuses a reasonable opportunity to settle a claim within its policy limits can be answerable to its own insured for the judgment that exceeds those limits. That is why a written request that your carrier settle within limits, made early, matters.

What you can do

1. Tell your insurer in writing that the claim exceeds your limits, ask it to settle the claim within those limits, and ask for written confirmation of what it has offered and when.

2. Ask for the other side's itemized repair estimate or total-loss valuation, including the comparable vehicles used and every adjustment. Numbers built without support routinely come down.

3. Do not sign anything, do not agree to pay a balance, and do not give the other side's insurer a recorded statement, until a lawyer has reviewed the claim.

4. Keep every letter and email from both insurers in one place, including the letter that first told you the claim exceeded your coverage.

5. Ask a local attorney about your personal exposure and about the exemptions that protect basic assets. California exempts a limited amount of motor vehicle equity under Cal. Code Civ. Proc. § 704.010, and Cal. Code Civ. Proc. § 704.730 protects home equity in an amount that starts at $300,000, can reach the countywide median sale price up to $600,000, and adjusts annually for inflation.

6. Ask that same attorney whether your insurer is handling the claim as it should, and whether the whole claim can be resolved for what the coverage will pay.

Most lawyers offer a brief initial call at no cost, and a few minutes on your specific facts is worth more than any general guidance, including this page.

⏱ Time limits apply. A claim for damage to a vehicle in California runs under Cal. Code Civ. Proc. § 338(c)(1), and a claim for injury runs under Cal. Code Civ. Proc. § 335.1. Which one applies to the claim against you, and when the clock started, depends on your facts. Have a California attorney confirm the deadlines on your case rather than relying on a general period.