Excess Judgment Exposure

Excess Judgment Exposure

Excess Judgment Exposure

Excess judgment exposure describes the gap between realistic verdict potential and available limits. It arises whenever the probable range of an adverse verdict exceeds the coverage in place, and it grows as defense costs erode limits in costs-inclusive policies.

The exposure runs in two directions: the insured faces personal liability for the excess, and the insurer faces potential bad faith liability for the entire judgment if it unreasonably failed to settle within limits.

Alternative Names:

Excess Verdict Exposure, Above-Limits Exposure

Why it Matters?

Identifying excess exposure early is the single most valuable output of case evaluation in insurance defense. It drives the obligation to notify the insured in writing, to place excess carriers on notice, to recommend settlement where appropriate, and to document that advice. Late recognition is the common thread in most bad faith verdicts.

Frequently asked questions

Who must be notified when excess exposure is identified?

Who must be notified when excess exposure is identified?

The insured, in writing, and typically any excess carriers in the tower. Documenting the notification and any settlement recommendation is essential protection for both counsel and carrier.

Does excess exposure change defense strategy?

Does excess exposure change defense strategy?

It should. It usually justifies earlier mediation, more rigorous damages analysis, and closer coordination with excess carriers than a case comfortably within limits would require.