Effective January 1, 2025, California personal injury liability coverage limits increase to $30,000 for one person injured or killed and $50,000.00 for two or more injured or killed.
Senate Bill 1107 calls for upping these limits by $20,000 and $40,000 respectively on January 1, 2035. This means by, that time, personal injury victims and their lawyers may have at their disposal $50,000 (if one victim) or $90,000 if two or more victims by the start of 2035.
Prior to the effective date of Senate Bill 1107, California law required vehicle owners and operators in the state to carry personal injury liability coverage of $15,000 per person injured or $30,000.00 per accident. That translates to a $15,000.00 limit for one injured person and $30,000.00 where two or more people suffer bodily injury in a single wreck.
The Costs of an Automobile Wreck:
With more liability coverage comes the prospect of greater compensation for plaintiffs. Victims face medical bills for such services as examinations, emergency room care, diagnoses, surgeries, rehabilitation, therapy, treatments, medications, and equipment such as walkers, wheelchairs, and leg braces. Many accident victims require ongoing medical treatment and may incur future medical expenses.
Lost wages and non-economic damages such as pain and suffering also constitute part of the personal injuries for which victims seek compensation.
The Insurance Information Institute reports that, in 2023, motor vehicle wrecks nationwide on average resulted in $26,501 in losses. The National Safety Council reports that for 2022:
- “Disabling” injuries to a crash victim carried on average costs of $162,000 in lost wages, medical expenses, damage to vehicles, and employer’s uninsured losses. In this category, you may find fractures, paralysis, or injuries that require surgery, extensive rehabilitation or treatment, or other long-term medical attention. Those with disabling injuries often have limitations in their ability to work or perform daily activities.
- Where the victim suffered a “possible injury” such as brief unconsciousness, a minor ache, or limping, the expenses per injury ran on average at $26,000.
- The average price tag for an “evident” injury, such as cuts, bruises, lacerations, and other injuries resulting in bleeding stood at $42,000.
The Time-Limited Demand:
To at least garner some compensation, plaintiffs’ lawyers may demand that insurance companies tender their policy limits. In such a pre-lawsuit negotiation tactic, the vehicle crash victim’s lawyer sends to the liability insurance carrier or its adjuster a demand for the policy limits. In the pre-Senate Bill 1107 days, the victim’s lawyer would request $15,000 for one victim and $30,000, where the lawyer represents multiple victims. The plaintiff’s lawyer will usually give the insurer only a few days to accept the offer or a lawsuit will ensue.
Bad-Faith Settlement
How the insurance company responds to such time-limited demands or otherwise behaves could trigger a bad faith practices claim. By way of a primer on bad faith insurance practices, California law imposes an implied obligation on insurance companies to act in good faith. This includes responding reasonably to settlement offers, such as paying a claim where liability for or validity of the claim is fairly clear.
An insurer who unreasonably fails to accept an offer can face a claim from its insured for bad faith insurance practices.
The claimant in a bad faith insurance practice suit may seek damages caused by the insurer’s bad faith. These may include:
*Interest on unpaid medical bills which the insurance should have paid
*Legal expenses, such as attorney fees and court costs, incurred in lawsuits to recover benefits under the insurance policy
*Anxiety and other mental anguish arising from the bad faith refusal to settle or pay
The implied duty and covenant of good faith in insurance and other contracts runs between parties to the contract or policy. The vehicle owner or driver covered by the policy and the liability insurer are the parties. Strictly speaking, third parties are not parties to the liability insurance policy. As a result, the victim of a wreck normally cannot sue the liability insurer for a bad faith refusal to settle or pay on a claim. California law does not treat such a third party as an intended beneficiary of the contract.
The victim in a motor vehicle can bring a bad faith claim against the insurer if the insured driver or owner assigns the claim to the victim and the liability of the insured is reasonably clear. Even with an assignment, the injured person must obtain a judicial ruling of the at-fault driver or owner’s liability before he or she brings a bad faith insurance settlement claim. This means that an agreed-upon settlement offer will preclude a bad faith claim by a third-party injured person.
What Must a Time-Limited Offer Contain?
The California Assembly raised the minimum insurance coverage requirements in conjunction with Senate Bill 1155, which addresses time-limited settlement offers. For a case that goes to trial, the insurance company risks a verdict against its insured and a potential bad faith refusal to settle the claim. Such prospects may still encourage the use of time-limited settlement demands, especially now that the minimum policy limits will double effective January 1, 2025.
So that time-limited demands do not spark unnecessary lawsuits over bad faith settlement practices, SB 1155 creates minimum standards for the practice:
- Offers must be written
- The party receiving the offer gets at least 30 days to respond if the offer is faxed, emailed, or sent by certified mail, or 33 days if sent by regular or first-class mail
- The offer is to settle all claims, including those for medical and other liens, within the liability insurer’s policy limits
- The offer must state the date of the crash and where it happened and describe the injuries known to the claimant
- The claimant must furnish medical records, bills, photographs of injuries or the crash, and other evidence to support the claim
- The claimant must offer to release all parties from liability, including future liability and present liability, for the loss
- The offer must recite the claim number if the claimant knows it
If the offer does not meet these requirements, an insurance company does not have any duty to respond and faces no bad faith settlement liability for not accepting or responding.
With regards to a reasonable offer, the insurance company must before expiration of the time to accept the offer, reject it, or request more information or time to investigate. By exercising the last choice within the time limits of the offer, the liability insurer is not treated as having rejected the offer.
Do Not Forget About Underinsured Motorist Coverage:
The higher limits on liability policies do not eliminate the need for plaintiffs’ lawyers to pursue underinsured motorist coverage. This insurance traditionally pays the difference between the total damages and the liability insurance limits when the victim is injured at the hands of an at-fault driver.
Senate Bill 1107 makes significant changes to how plaintiffs can use underinsured motorist policies to increase compensation. Specifically, the options increase for more funding for compensation First, an “underinsured vehicle” is defined as one where the actual damages exceed what the injured party gets from the liability policy, not necessarily the limits of the liability policy. Second, the underinsured carrier does not get a credit or an offset for the limits of the liability policy. Third, plaintiffs under Senate Bill 1107 may now “stack,” or add, the underinsured limits from each vehicle on the automobile insurance policy.
Unlike liability coverage, which the tortfeasor must have, underinsured motorist coverage is part of the victim’s automobile insurance. This means that the underinsured motorist carrier and the would-be plaintiff stand as contracting parties. As such, a plaintiff could pursue a bad faith insurance practice claim against his or her own insurance company for failing to settle or pay where the negligence or fault of the tortfeasor is reasonably clear.
