When a car accident claim exceeds the at-fault driver’s insurance limits, the insurer pays up to the policy maximum and the driver becomes personally responsible for the rest. The injured party can pursue that unpaid balance through a lawsuit and, if they win, collect from the driver’s wages, bank accounts, and property. There are also several other places the money can come from: the injured party’s own underinsured motorist coverage, a third party such as an employer or vehicle owner, and in some cases the at-fault driver’s own insurer if it unreasonably refused to settle.
Why the Gap Exists
State minimum liability requirements are low. Common minimums sit at $25,000 per person and $50,000 per accident for bodily injury, and some states require as little as $15,000 per person. A single emergency surgery, a hospital stay, and follow-up rehabilitation can generate six figures in medical bills alone, before lost income or long-term care. When damages run past those minimums, the difference doesn’t disappear. Someone has to cover it, and the law gives the injured party several ways to try.
Your Own Underinsured Motorist Coverage
The first place to look is your own auto policy. Underinsured motorist coverage (UIM) pays you when the at-fault driver’s policy runs out, up to the limit you carry. About 20 states require drivers to carry uninsured or underinsured motorist coverage. In the rest, it’s optional, and many drivers skip it.
UIM acts as a second layer stacked on top of the at-fault driver’s policy. If the other driver’s insurer pays its full limit and your damages still aren’t covered, your own insurer pays the shortfall up to your UIM limit. Check your declarations page before assuming you don’t have it. This is often the fastest source of additional recovery because you’re dealing with your own insurer rather than chasing a stranger’s assets.
Going After the At-Fault Driver Personally
Once the at-fault driver’s insurance pays its maximum, the injured person can sue for the balance and obtain a judgment for the full amount of damages. That judgment can cover medical expenses, lost wages, property damage, and compensation for pain and long-term disability. It’s enforceable against the driver’s personal assets.
The main enforcement tools are wage garnishment, bank levies, and property liens. Federal law caps wage garnishment for most debts at 25% of disposable earnings per pay period, or the amount by which weekly earnings exceed 30 times the federal minimum hourly wage, whichever is less.1Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment A bank levy freezes funds in the debtor’s account. A property lien attaches to real estate and prevents a clean sale until the judgment is paid.
What State Exemptions Protect
State law shields certain assets from judgment creditors. Retirement accounts, a portion of home equity, and basic personal property are commonly protected, though the specifics vary dramatically. Some states offer unlimited homestead protection, keeping a debtor’s primary residence entirely off-limits. Others provide no homestead exemption at all. Everything else falls somewhere between nominal protection and six-figure caps.
The practical result: winning a judgment and collecting on one are different things. A driver who carried only the state minimum policy often has little in the way of seizable assets. A judgment against someone in that position is sometimes called judgment-proof. The judgment itself remains valid for years and can typically be renewed, but it may never produce actual payment.
Interest Keeps the Debt Growing
Unpaid judgments accrue interest. In federal court, post-judgment interest is calculated based on the weekly average one-year Treasury yield for the week before the judgment was entered, compounded annually.2Office of the Law Revision Counsel. 28 USC 1961 – Interest State courts set their own rates, and these vary widely. Interest runs from the date the judgment is entered until it’s paid, so an at-fault driver who ignores a large judgment owes substantially more as the years pass. For the injured party, interest partly compensates for the delay.
The injured party doesn’t need to collect everything at once. Life circumstances change. The at-fault driver may acquire assets later, take a higher-paying job, or inherit property.
Other Parties Who May Be Liable
When the at-fault driver’s insurance and personal assets aren’t enough, other defendants may be on the hook. Identifying them can be the difference between partial and full recovery.
The Driver’s Employer
If the at-fault driver was working at the time of the crash, the employer may be liable under respondeat superior. This applies when the employee was acting within the scope of employment: the driving was the kind of work the employee was hired to do, happened during authorized work hours, and served the employer’s interests at least in part. Employers typically carry commercial insurance with much higher limits than personal auto policies.
Employers can also face direct liability for their own failures, such as hiring a driver without checking a problematic driving record, failing to maintain company vehicles, or allowing someone they knew was unsafe to drive on the job. These claims don’t depend on whether the employee was technically within the scope of employment.
The Owner of the Vehicle
If the at-fault driver was using someone else’s vehicle, the owner may be liable under negligent entrustment. The core question is whether the owner knew or should have known the driver was unfit. Lending a car to someone unlicensed, intoxicated, or with a history of reckless driving can create liability for the resulting injuries. The injured person must show the owner entrusted the vehicle, knew of the driver’s incompetence, and that the entrustment led directly to the harm.
When the Insurer Should Have Settled
Insurance companies owe their own policyholders an implied duty of good faith and fair dealing. When the injured person makes a reasonable demand to settle within the policy limit and the insurer refuses, the insurer may be acting in bad faith if there was a substantial likelihood a verdict would exceed the policy limit. In that situation, the insurer can be held liable for the entire excess judgment, not just the policy limit.
Suppose the injured party offered to settle for $50,000 (the policy limit), the insurer declined, and a jury later awarded $300,000. In a bad faith scenario, the insurer may owe the full $300,000 rather than just its $50,000 limit. Courts evaluate whether the insurer gave the policyholder’s financial interests at least as much consideration as its own when deciding whether to accept the settlement demand.
Bad faith claims are governed by state law, and the standards differ. Some states let the insured sue their own insurer directly. Others require the insured to assign the bad faith claim to the injured party. If you’re the at-fault driver and you believe your insurer unreasonably refused to settle within limits, ask an attorney about a bad faith claim. If you’re the injured party and the insurer walked away from a reasonable policy-limits demand, that refusal may work in your favor later.
Settlement, Releases, and the Filing Deadline
Most claims that exceed policy limits get resolved through negotiation. The at-fault driver’s insurer usually offers its full policy limit fairly quickly when liability is clear and damages plainly exceed coverage. The real negotiation is about the gap.
Mediation is a common tool. A neutral mediator facilitates discussion and helps identify workable compromises, but doesn’t impose a decision.3U.S. Bureau of Labor Statistics. Arbitrators, Mediators, and Conciliators Occupational Outlook Handbook Structured settlements are another option when the at-fault driver agrees to pay beyond the insurance limit but can’t produce a lump sum. Payments are spread over time, often funded through an annuity, providing guaranteed periodic income at the cost of flexibility.
Read Any Release Before Signing It
A release of all claims form permanently waives your right to seek further compensation from the at-fault driver and their insurer, even if you discover additional injuries later. Once signed, it’s binding. If the insurance company offers its policy limit and asks you to sign a release, you’re giving up the ability to pursue the driver’s personal assets for the remainder. When damages clearly exceed the policy limit, accepting only the limit in exchange for a full release can be a costly mistake. Have an attorney review the terms before signing.
Don’t Miss the Statute of Limitations
None of these options matter if you miss the filing deadline. Personal injury statutes of limitations range from one year to six years depending on the state, with two to three years being the most common. Once the deadline passes, the court will dismiss the case regardless of how strong the claim is. If you’re approaching the limit while still negotiating, filing a lawsuit preserves your rights while talks continue. Waiting for a “final offer” from the insurer while the clock runs out is one of the most expensive mistakes an injured person can make.
If the At-Fault Driver Files Bankruptcy
Some at-fault drivers file for bankruptcy to escape a large accident judgment. A standard negligence-based car accident judgment is generally dischargeable in Chapter 7. Once discharged, the bankruptcy court issues an injunction that bars the injured party from collecting the debt from the debtor’s personal assets.4Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
One major exception matters here: debts for death or personal injury caused by operating a vehicle while intoxicated are not dischargeable.5Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge If the at-fault driver was drunk or drug-impaired at the time of the crash, the judgment survives bankruptcy and collection efforts can continue indefinitely.
Even when a debt is discharged, the injured party may still be able to recover from the at-fault driver’s auto insurance policy. The discharge protects the debtor personally but does not eliminate the insurer’s obligation to pay under the policy. Courts have allowed lawsuits to proceed against a bankrupt debtor solely to reach insurance proceeds.