Excess Judgment

Example

“The jury awarded $800,000 in damages, but since Mark's liability policy only covered $300,000, he faced a $500,000 excess judgment that he had to pay from his personal assets.”

Memory Tip

Think 'EXcess = EXpensive surprise' - it's the expensive amount beyond your insurance that you must pay yourself.

Why It Matters

An excess judgment can be financially devastating, potentially forcing you to liquidate savings, sell property, or even file for bankruptcy. Understanding this risk helps you choose adequate insurance limits and consider additional umbrella coverage to protect your assets.

Common Misconception

Many people believe their insurance company will negotiate settlements to avoid excess judgments on their behalf, but insurers primarily protect their own interests up to policy limits. Once a judgment exceeds your coverage, you're largely on your own to handle the excess amount.

In Practice

Lisa's dog bit a child, resulting in medical bills and permanent scarring. Despite Lisa's homeowner's insurance company providing legal defense, the jury awarded $450,000 in damages. Her policy only covered $300,000, leaving her with a $150,000 excess judgment. She had to take out a home equity loan and liquidate her retirement savings to pay the excess amount, which could have been avoided with a $300 annual umbrella policy.

Etymology

Combines 'excess' meaning 'beyond the limit' with 'judgment,' the legal term for a court's final decision in a lawsuit, literally meaning a court decision beyond insurance limits.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also