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 Confused with
Related terms
Frequently asked questions
Who must be notified when excess exposure is identified?
Does excess exposure change defense strategy?
