What if the insurance company fails to settle?
If you’ve been in a serious car accident and the other driver was at fault, chances are their insurance company will step in to handle the claim. That’s how it’s supposed to work. You file a claim, the insurance company investigates, and ideally, they offer a fair settlement—within the limits of the policy.
But what if they don’t?
What if the insurance company refuses to settle, even though the claim is clearly worth more than the policy limits? What if they drag their feet or make a lowball offer, and things spiral into a lawsuit?
This is where it gets complicated—and where the law can actually work in your favor.
Understanding Policy Limits
First, a quick refresher: every auto insurance policy includes liability limits—the maximum amounts an insurance company agrees to pay for a covered event.
Most policies list these limits as two numbers, such as $100,000/$300,000 or $250,000/$500,000. The first number is the per-person limit, or the most the insurer will pay to any one individual. The second is the per-accident limit, which is the total the insurer will pay for all injuries in a single incident. If you’re the injured party, that first number is most relevant—it’s the cap on how much you can recover from the at-fault driver’s policy.
For example, if a driver has $100,000 in liability coverage and causes an accident resulting in $150,000 of injury-related damages, their insurer will only pay up to $100,000. The remaining $50,000 becomes the driver’s personal responsibility. Insurers want to avoid exposing their policyholders to that kind of liability—because if they don’t act reasonably, they could potentially be sued themselves.
Don’t Forget to Check Your Own Insurance Too
If the other driver’s liability coverage isn’t enough to cover your damages, your own insurance may step in. In New Hampshire, most auto policies include uninsured and underinsured motorist coverage (UM/UIM).
That coverage doesn’t always “stack.” In other words, if your UM/UIM limit is equal to or lower than the at-fault driver’s, it typically won’t add anything to your recovery. But if your coverage is higher, your policy may cover the difference—up to your limit.
For instance, if the at-fault driver has a $100,000 liability limit and your underinsured motorist limit is $300,000, you can potentially recover an additional $200,000 from your own insurer after settling for the full $100,000 with the other driver’s insurance. However, if both policies are capped at $100,000, your coverage likely won’t contribute anything more.
Important: Before pursuing a UM/UIM claim, you must first obtain your insurer’s consent to settle with the at-fault driver’s insurance for policy limits. These claims are governed by strict rules—including deadlines and procedural requirements—so it’s essential to consult an experienced personal injury attorney if you think underinsured motorist coverage may apply.
The Duty to Settle Reasonably
Here’s the important part: Insurance companies have a duty to act in good faith when handling claims. That means if there’s an opportunity to settle a case within the policy limits and it’s reasonably clear the insured is liable, the company should take it.
If they don’t? They could be putting their own policyholder at serious financial risk.
And courts take that seriously.
A Real-Life Example
Imagine this: You’re hit by another driver and suffer serious injuries. Your medical bills, lost wages, and pain and suffering easily add up to $200,000. But the other driver only has $100,000 in coverage.
You and your lawyer send a demand to the insurance company offering to settle for $100,000—the full policy limits. You give them all the medical records they need, a reasonable deadline to respond, and a clear picture of your damages.
But the insurance company refuses. Maybe they deny liability. Maybe they ignore the deadline. Maybe they offer you $50,000 and hope you’ll just take it.
So you sue. A jury awards you $200,000.
Now the insured—the driver who hit you—is technically on the hook for the $100,000 difference.
But here’s the twist: Because the insurance company had a fair chance to settle within the policy limits and failed to do so in good faith, they may now be responsible for the entire verdict—including the amount above the policy limit.
Bad Faith and Extra-Contractual Liability
In legal terms, this is known as “bad faith.” If an insurer acts unreasonably or recklessly by refusing to settle a clear-cut claim within limits, they can be held liable for the full amount of the judgment—even if it goes well beyond what they promised to cover in the policy.
That’s right: An insurance company that gambles and loses can end up paying far more than the original policy required. That’s a big deal.
It’s also why experienced personal injury attorneys are careful about documenting every step of the settlement process—especially when they’re offering to resolve the case within the available coverage. Those details matter if things end up in court.
What This Means for Injured People
If you’re the person who was hurt and the insurance company refuses to settle, don’t panic. You’re not out of options.
You might still go to trial and win a larger verdict—and if the insurer acted in bad faith, you may be able to recover the full amount from them later. In fact, the at-fault driver may even assign their rights to you in exchange for protecting them from personal liability. That’s a common approach in these situations.
The key is making a clear, fair, and well-documented settlement demand early in the process. You want it to be obvious that the insurance company had a chance to settle, and chose not to.
What This Means for At-Fault Drivers
If you’re the one being sued, and your insurance company refuses to settle when they should, you’re not powerless either. You may have a bad faith claim against your insurer if their decision ends up exposing you to a verdict above your policy limits.
It’s a frightening position to be in—but the law gives you recourse.
Bottom Line
Insurance companies have a duty to look out for their policyholders. That includes accepting fair settlement offers when liability is clear and damages are within policy limits. When they fail to do that, they can be held responsible for more than just what the policy says.
If you’ve been seriously injured and are struggling to get a fair settlement—or if you’re being sued and worried your insurer isn’t doing enough—we can help.
At Cohen and Winters, we’ve handled personal injury cases just like this. We know how to build strong settlement demands, how to recognize bad faith, and how to fight for the compensation our clients deserve.
Have questions about your case? Let’s talk.