A policy limits settlement is when an insurance company resolves a claim by paying the full maximum amount available under its policy.
At a high level, personal injury law firms generate a demand letter that requests policy limit settlement. The process of insurance companies paying out a settlement is called "tendering".
Take auto accidents as an example. Insurance companies may opt to tender policy limits to quickly settle the claim. This depends on the severity of the incident and extent of medical treatments and costs. Plaintiffs and their attorneys can accept the demand response, negotiate for more, or proceed to litigation.
This guide walks you through the strategic timing, documentation requirements, negotiation tactics, and technology tools that help personal injury attorneys successfully tender policy limits and navigate the complexities of personal injury demand letter policy limit settlements.
A policy limits settlement happens when an insurance company agrees to pay the full maximum amount available under its policy to resolve a claim.
In personal injury cases, this typically occurs when the injured party's damages (pain and suffering) clearly meet or exceed what the at-fault party's insurance can cover. This means that the harm is severe enough that the available insurance won't fully compensate the victim.
Tender policy limits meaning refers to the formal process where a claimant offers to settle the case for the maximum available insurance coverage. When an attorney tenders policy limits, they're essentially saying: "We'll accept your full coverage amount and release your insured from liability."
Insurance companies agree to pay their policy limits for a few key reasons. Clear liability combined with serious damages creates significant exposure for the insurer—if they reject a reasonable offer and the case goes to trial, they could face a bad faith lawsuit for any verdict exceeding the policy limits. By tendering limits early, insurers protect both their client and themselves from potentially devastating financial consequences.
Timing can make or break a policy limits demand. Sending a demand before medical treatment concludes often undermines credibility. It implies you can't demonstrate that injuries have reached maximum medical improvement (MMI). This is the point where doctors say further recovery is unlikely.
Waiting too long creates different problems. The statute of limitations clock keeps ticking. Insurers may question why you delayed if the case was truly as strong as claimed.
Most attorneys tender policy limits after treatment wraps up. They will factor time to allow for negotiation and potential litigation if the demand gets rejected.
You'll also want to consider where the insurer stands in their investigation. If the carrier hasn't had reasonable time to investigate liability and evaluate the claim, they may reject your demand as premature—and courts might later find that rejection wasn't bad faith.
Insurers walk a fine line when evaluating policy limits demands. They owe a duty to their insured to settle reasonable claims within policy limits, but they also want to avoid paying more than necessary.
Several red flags indicate potential bad faith:
Document everything when you suspect bad faith. Every phone call, email, and letter creates a record that may later prove the insurer's unreasonable conduct.
Knowing available coverage before making demands gives you crucial strategic advantages. You can tailor your negotiation approach, decide whether to demand full limits or leave room for negotiation, and assess whether pursuing the case to verdict makes financial sense.
Formal written requests to the defendant or their insurer asking for declarations pages showing coverage limits, effective dates, and endorsements. Many states require insurers to provide this information once litigation begins, though getting it pre-suit can be challenging.
Once you file suit, you can subpoena insurance policies and related documents. Interrogatories asking defendants to identify all insurance coverage and policy limits are standard in personal injury litigation.
AI has rapidly redefined how personal injury firms prepare policy limits demands. These platforms speed up claims timelines and accelerate case velocity. What once took weeks of manual work can now happen in days or even hours with AI assistance.
AI tools analyze thousands of pages of medical records to extract relevant treatment information. These tools can create organized timelines for comprehensive medical chronology. They can also identify key medical findings for snapshot medical summaries.
Machine learning models trained on thousands of personal injury settlements can analyze case facts—injury severity, treatment type, liability clarity, venue, and other factors—to predict likely settlement ranges. These data-driven valuations help attorneys set realistic client expectations and identify when policy limits demands are appropriate.
AI-powered platforms can draft comprehensive legal documents in minutes. Most common are robust demand letters that feature medical chronologies, damages calculations, and liability arguments. But EvenUp enables firms to also generate deposition summaries, response for interrogatories, mediation briefs, negotiation sheets, and many more.
EvenUp goes further than other tools by offering line-level citations that point to exactly where in the case files information is sourced. And EvenUp offers Mirror Mode, which enables firms to save and reuse templates based on individual attorney and firm-wide preferences.
EvenUp's Claims Intelligence Platform combines all these AI capabilities into one purpose-built solution for personal injury firms. Our demand generation tools create comprehensive, persuasive demand packages in a fraction of the time traditional methods require—helping you tender policy limits when appropriate and negotiate maximum settlements for every client. When you're ready to transform your settlement practice, schedule a call to see how our platform accelerates your path to justice.
Insurers typically have the timeframe specified in your demand letter to respond, usually ranging from 15 to 30 days depending on case complexity. However, what's "reasonable" varies by jurisdiction and circumstances—a simple rear-end collision with clear liability might warrant a shorter deadline than a complex multi-vehicle accident requiring extensive investigation.
Yes, medical liens and subrogation claims are typically deducted from the gross settlement amount, sometimes significantly reducing what the client actually receives. Medicare and Medicaid liens are particularly strict and require satisfaction before the injured party receives funds, while some private liens may be negotiable.
Excess judgments can severely impact credit scores and may result in wage garnishment, bank account levies, or liens on real property depending on state collection laws. This reality creates strong motivation for defendants to pressure their insurers to settle within policy limits when liability is clear.
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