How to Effectively Use Policy Limit Discovery in Your Case

How to Effectively Use Policy Limit Discovery in Your Case

Policy limit discovery not only informs case strategy but also shapes settlement negotiations and litigation tactics. When used effectively, it can maximize client recovery and minimize surprises.

This guide walks you through how to strategically use policy limit discovery to your advantage, from the initial request to leveraging the information in negotiations.

What Is Policy Limit Discovery?

Policy limit discovery is the process of uncovering the maximum insurance coverage available under a defendant’s liability policy. This can include primary liability policies, umbrella policies, and sometimes multiple policies covering different parties involved in a claim.

Knowing these limits helps attorneys:

·       Assess potential recovery.

·       Structure demands are realistic.

·       Evaluate the defendant’s financial exposure.

Identify opportunities for bad faith claims or excess coverage.

When to Initiate Policy Limit Discovery

Timing is key. Early discovery of policy limits allows for informed client counseling and strategic planning. Many attorneys send a policy limit demand letter shortly after filing a claim or early in litigation to prompt insurer disclosure.

However, in some jurisdictions, you may need to wait until formal discovery opens to serve interrogatories or requests for production. Knowing the local rules and case law around policy limit disclosures is critical to avoid procedural missteps.

How to Request Policy Limit Information Effectively

Here are several best practices for requesting policy limits:

1. Send a Clear, Formal Demand Letter

Begin with a letter addressed to the defendant’s insurer that:

Clearly identifies the case and parties.

Request disclosure of all applicable liability policies and their limits.

Includes a reasonable deadline (e.g., 30 days).

Cites any applicable statutes or case law requiring disclosure.

A professional, well-documented demand sets the tone and creates a record for later use if disputes arise.

2. Include Supporting Documentation

Attach relevant medical records, accident reports, or expert opinions that demonstrate the severity of damages. This increases pressure on the insurer to respond honestly and promptly.

3. Be Prepared to Follow Up

If the insurer does not respond or provides incomplete information, be ready to send follow-up letters or move to compel disclosure via formal discovery motions.

Using Formal Discovery Tools

When informal requests are unsuccessful or not possible, use formal discovery methods:

Interrogatories: Ask defendants to identify all insurance policies applicable to the claim.

Requests for Production: Request copies of insurance policies and declarations pages.

Depositions: Question insurance representatives or defendants about coverage and limits.

Be mindful of deadlines and discovery rules in your jurisdiction to ensure timely responses.

Leveraging Policy Limit Information

Once you obtain policy limit information, use it strategically:

1. Evaluate Settlement Strategy

If policy limits are low relative to damages, counsel clients accordingly and explore alternative recovery sources like underinsured motorist coverage or defendants’ personal assets.

2. Make Policy Limit Demand Offers

Present a demand for settlement at or near the policy limits when appropriate, putting insurers on notice that refusal to settle may lead to bad faith exposure.

3. Consider Bad Faith Claims

If insurers refuse to disclose policy limits or act in bad faith by denying reasonable settlements within limits, it may support claims for damages exceeding the policy limits.

Pitfalls to Avoid

Assuming Policy Limits Equal Available Recovery: Sometimes policies exclude certain claims or have sublimits. Confirm details before advising clients.

Ignoring Multiple Policies: Check for umbrella or excess coverage that may apply.

Delaying Requests: Waiting too long to seek policy limits can limit settlement leverage.

Conclusion

Policy limit discovery is a powerful tool for attorneys seeking to maximize client recovery and streamline case resolution. By understanding when and how to request policy limits, and how to use that information strategically, you can enhance your negotiation position and protect your client’s interests.