A policy limits demand proposes resolution at the applicable policy limit in exchange for a release of the insured. Because acceptance eliminates the insured's personal exposure, refusal shifts the risk of an excess verdict onto the insurer.
Validity generally requires that the claim be within coverage, the amount be within limits, and the release be complete as to the insured.
Alternative Names:
Limits Demand, Within-Limits Demand
Why it Matters?
Once a valid within-limits demand is on the table, the defense analysis becomes narrow: is there any realistic scenario in which a verdict exceeds the limits. If there is, the demand should ordinarily be accepted, because the carrier is trading a capped loss for uncapped exposure. Declining a within-limits demand in a case with genuine excess potential is the decision that generates bad faith verdicts.
Frequently Confused with
Related terms
Frequently asked questions
When should a policy limits demand be accepted?
What makes a limits demand invalid?
