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⚠️ '''Excess judgment''' is a court-awarded damages amount that exceeds the [[Definition:Coverage limit | policy limits]] of a defendant's [[Definition:Liability insurance | liability insurance]], leaving the [[Definition:Insured | insured]] personally responsible for the difference. In a typical scenario, a [[Definition:Policyholder | policyholder]] carries $1 million in [[Definition:Commercial general liability (CGL) | commercial general liability]] coverage, but a jury returns a $3 million verdict — the $2 million gap constitutes the excess judgment. These situations arise most frequently in [[Definition:Bodily injury liability | bodily injury]], [[Definition:Auto liability insurance | auto liability]], and [[Definition:Professional liability insurance | professional liability]] cases, and they carry profound financial consequences for both the insured and the insurer.

🔍 The path to an excess judgment often begins with the insurer's handling of the [[Definition:Claim | claim]] during settlement negotiations. Under most [[Definition:Liability insurance | liability policies]], the carrier controls the defense and has the authority to accept or reject settlement demands. When a [[Definition:Claimant | claimant]] makes a [[Definition:Policy limits demand | policy-limits demand]] — an offer to settle the entire case for an amount within the available coverage — and the insurer unreasonably refuses, the insurer may be exposed to a [[Definition:Bad faith | bad faith]] claim if a larger verdict follows. Courts in many jurisdictions have held that an insurer owes a duty of good faith to its insured when evaluating settlement opportunities, and breaching that duty can shift the excess judgment liability from the insured back to the carrier, sometimes with additional [[Definition:Punitive damages | punitive damages]].

💰 Excess judgments sit at the intersection of [[Definition:Claims handling | claims management]], [[Definition:Litigation management | litigation strategy]], and [[Definition:Bad faith | bad faith]] exposure, making them a focal point for carrier leadership and [[Definition:Claims adjuster | claims professionals]] alike. Insurers invest heavily in training adjusters to recognize cases with verdict potential beyond policy limits and to handle [[Definition:Policy limits demand | policy-limits demands]] with documented, good-faith deliberation. From the insured's perspective, the risk of an excess judgment is the primary driver behind purchasing [[Definition:Umbrella insurance | umbrella]] or [[Definition:Excess liability insurance | excess liability]] coverage that sits above primary policies. The frequency and size of excess judgments have increased alongside the broader trend of [[Definition:Social inflation | social inflation]] and [[Definition:Nuclear verdict | nuclear verdicts]], prompting the industry to reevaluate limit adequacy, pricing, and settlement practices across casualty lines.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Bad faith]]
* [[Definition:Excess liability insurance]]
* [[Definition:Umbrella insurance]]
* [[Definition:Nuclear verdict]]
* [[Definition:Social inflation]]
* [[Definition:Policy limits demand]]
{{Div col end}}

Definition:Excess judgment - Revision history

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