What is Excess Judgment?

Excess Judgment comes about in cases where a judge determines that an insurer must pay beyond what the insurance policy limit entails. The amount in excess of the insurance policy limit is what is considered the excess judgment.

Excess Judgment is typically carried out when a judge finds that the insurance company acted in bad faith during a claim settlement. This is the case when insurance companies potentially try to mislead their clients, use unreasonable or illegitimate grounds to deny coverage or refuse to pay claims, or slow the process of investigating claims or paying damages among other ways. Insurers are typically incentivized to limit the amount of losses resulting from claims, which is what often causes instances of bad faith. Bad faith claims have caused rulings such as Cunningham v. Standard Guaranty Insurance Co., in which an insurance company negotiated in bad faith following an injury to an individual in a car crash.

Some argue that excess judgment undermines the principle of limited liability, and punishes improperly by going beyond agreed-upon policy limits. Others simply believe that that are cases in which people need protection from insurance companies, and that excess judgment is the best pathway to restitution when insurance companies act in bad faith.