Insurance law can feel like a maze. The terminology alone is enough to make your head spin. But if you or someone you love has been involved in a personal injury claim in New Hampshire, there is one phrase worth understanding clearly: failure to settle within policy limits. It sounds technical. It matters enormously.
At Cohen & Winters, we work with injury victims across New Hampshire who are navigating the often-frustrating world of insurance claims. Here is a plain-language breakdown of what this concept means, why it matters, and what it could mean for your case.
The Basics: What Are Policy Limits?
Every insurance policy has a cap — a maximum dollar amount the insurance company is obligated to pay out on a covered claim. That cap is called the policy limit. For example, if someone carries $100,000 in liability coverage and they cause a car accident that injures you, their insurer is contractually required to pay claims up to that $100,000. Not a penny more — at least, not automatically.
Policy limits can feel frustratingly low when serious injuries are involved. Medical bills pile up. Lost wages add up. And sometimes, the policy limit simply does not come close to covering the full extent of someone’s damages.
So What Does “Failure to Settle Within Policy Limits” Mean?
Here is where things get interesting. When an injured person makes a time-limited settlement demand within the at-fault party’s policy limits, the insurance company has a legal duty to seriously consider that offer. This is sometimes called a Dumas demand or a policy limits demand, depending on the jurisdiction.
The idea is straightforward. If your damages clearly exceed the policy limit, and you offer to settle for the full policy amount, the insurer should take that deal. It protects their insured from personal liability. If the insurer refuses — or drags their feet and lets the deadline pass — and a jury later awards a verdict that exceeds the policy limit, the insurance company may be on the hook for the entire judgment. Not just the policy amount. All of it.
That is failure to settle within policy limits. And in New Hampshire, it can have serious consequences for the insurer.
The Insurance Company’s Duty of Good Faith
New Hampshire insurance law requires insurers to act in good faith when handling claims. That duty runs not just to the policyholder — it also shapes how the insurer must respond to settlement demands made by injured parties. When a clear opportunity to settle within policy limits arises and the insurer unreasonably refuses, courts have found that the insurer can be held liable for any excess verdict that follows.
Think about it from the insured’s perspective. They paid their premiums in good faith. They trusted their insurance company to protect them. If the insurer gambles with that person’s financial future by refusing a reasonable settlement — and loses — the insured should not be left holding the bill. New Hampshire courts have consistently recognized this principle.
When Does This Come Up in Real Cases?
Failure to settle within policy limits most commonly arises in situations like these:
- Serious car accidents where medical costs clearly exceed the at-fault driver’s coverage
- Slip and fall or premises liability cases with documented, significant injuries
- Cases where liability is clear and damages are well-documented from the outset
- Situations where the injured party’s attorney sends a formal, time-limited demand letter to the insurer
In these scenarios, an experienced attorney will often send a carefully crafted demand letter that sets a reasonable deadline and lays out the evidence supporting the claim. If the insurer fails to respond reasonably, the stage is set for an excess judgment — and potential insurer liability.
What Happens After an Excess Verdict?
If a jury returns a verdict that exceeds the policy limit — say, $350,000 on a $100,000 policy — the at-fault party is technically responsible for the difference. But if the insurer’s bad faith refusal to settle caused that outcome, the insured may have a claim against their own insurance company for the excess amount. In some cases, the insured can even assign that claim to the injured party as part of a settlement agreement.
It is a complex area of law. The details matter enormously. Timing, documentation, the specific language of the demand letter — all of it plays a role. This is not territory you want to navigate without knowledgeable legal counsel.
How Cohen & Winters Can Help
If you have been seriously injured in New Hampshire and are dealing with an insurance company that seems more interested in protecting its bottom line than fairly resolving your claim, you need an advocate in your corner. The team at Cohen & Winters understands how insurers think — and how to hold them accountable.
Whether your case involves a straightforward policy limits demand or a more complex bad faith situation, we are here to help you understand your options and fight for the outcome you deserve. Contact Cohen & Winters today for a free consultation. Let us take the stress of dealing with insurance companies off your plate — so you can focus on what matters most.