Making or Responding to a Time-Limited Policy-Limits Demand: A Practical Guide

Summary. This guide walks through a time-limited policy-limits demand from both sides of the table, step by step. For the claimant's lawyer, it covers confirming coverage and limits, building the evaluation package, quantifying liens, choosing between pre-suit and post-suit timing, drafting to the governing statute, setting deadlines and conditions, delivering the demand, and managing the response period. For the insurer, it covers logging and acknowledging the demand, checking coverage, notifying the insured, evaluating the claim under the correct legal standard, asking for information or more time without making a counteroffer, and accepting, tendering, or rejecting with written reasons, including in multiple-claimant cases. Separate steps address the obligations of defense counsel and the choices facing the insured, and a final step covers what happens after a demand expires. A timeline and cost table, a worked example involving a cyclist and a landscaping company's pickup, common mistakes, an FAQ, and takeaways close the guide.

Lena Park was riding in a marked bike lane in Decatur, Georgia, when a pickup towing a mower trailer turned right across her path. The truck belonged to Greenway Grounds LLC, a nine-person landscaping company, and the driver was its owner's nephew. Park's helmet cracked. She has a traumatic brain injury, a shattered left wrist that needed two surgeries, and $268,000 in medical charges so far, with a neuropsychologist predicting she will not return to her job as a surgical nurse. Greenway's commercial auto policy has a $1 million combined single limit. Greenway has no umbrella. Its owner has a house, a truck, and a business that would not survive a $4 million judgment.

Park's lawyer, Tomas Reyes, believes the case is worth well over $1 million. He also knows that a demand for the full limit, made correctly, is the single most valuable document he will write in the case: if the insurer accepts, his client gets $1 million within weeks; if the insurer unreasonably refuses, the insurer may end up owing the whole verdict. On the other side, the adjuster at Greenway's insurer knows that the same document is the one most likely to end her career if she mishandles it. Greenway's owner, meanwhile, does not yet know that his family's financial future depends on how two strangers handle a letter.

This guide follows that letter from both ends. The legal doctrine behind each step (why the duty to settle exists, how each state's standard works, and what courts have done with short deadlines, impossible conditions, and setup claims) is explained in Policy-Limits Demands and Insurer Bad Faith: How Time-Limited Demands Set Up Excess Verdicts. The forms are in the Policy-Limits Demand Toolkit: Demand Letters, Insurer Responses, and Excess Exposure Letters.

The short answer

• For the claimant's lawyer: confirm every policy and limit; send complete records, bills, liability proof, and lien information; draft to the governing statute (Cal. Civ. Proc. Code § 999.1 in California, O.C.G.A. § 9-11-67.1 in Georgia, Mo. Rev. Stat. § 537.058 in Missouri); give at least the statutory minimum time and more if the file is large; use only conditions that protect your client; deliver to the right address with proof; and answer reasonable questions promptly.
• For the insurer: log and calendar the demand the day it arrives; acknowledge it in writing; tell the insured and defense counsel; resolve coverage questions fast or reserve rights while still evaluating; evaluate under your state's standard (in California, as if you had no limits, per Crisci v. Security Insurance Co., 66 Cal. 2d 425 (1967)); ask for specific information or an extension in writing before the deadline; and either accept the material terms unconditionally, tender with reasonable conditions, or explain a rejection in writing.
• For defense counsel: your client is the insured. Send the insured the demand and an excess exposure letter immediately, give the insurer a candid written evaluation, and recommend that the insured consult personal counsel.
• For the insured: read the excess letter, get personal counsel if you have assets at risk, write to the insurer urging settlement within limits, and cooperate with every reasonable request for information.
• Expect the timeline to be short. Most demands give 30 days. Florida's 2023 amendments to Fla. Stat. § 624.155 give insurers a 90-day safe harbor for tendering after notice with sufficient evidence, which affects how Florida demands are timed and answered.
• If the demand expires, the case usually goes to trial. An excess verdict is followed by an assignment of the insured's claim to the claimant and a bad-faith suit against the insurer.

Before you start: decision points

For the claimant's lawyer

Is this a limits case? A policy-limits demand makes sense when liability is reasonably clear and damages plainly exceed the available coverage. If liability is genuinely disputed, an insurer can reasonably decline, and courts will say so (Pavia v. State Farm Mutual Automobile Insurance Co., 82 N.Y.2d 445 (1993)). If damages are near the limits, a limits demand is just an opening number. Use the valuation tools in the Settlement Negotiation Toolkit: Case Valuation Worksheets, Concession Plans, and Offer Letters and the intake screen in the Personal Injury Claim Intake and Evaluation Checklist: A Practical Checklist.

What does the client actually want? Some clients want the money now. Others, with catastrophic injuries and tiny policies, may do better with an excess verdict and an assignment, though collection can take years and is uncertain. The client decides whether to settle (ABA Model Rule 1.2(a)), and the client must understand that a properly made demand may simply be accepted. Never make a demand you would advise the client to refuse.

Which law governs? The duty to settle is state law. Identify the state whose law will govern the bad-faith claim (usually where the policy was issued or the accident happened) and whether a demand statute applies. California's statute applies only to pre-complaint demands on auto, motor vehicle, homeowner, and commercial premises liability claims by represented claimants (Cal. Civ. Proc. Code § 999.5; Cal. Civ. Proc. Code § 999.4). Georgia's statute has been amended several times; work from the official text in force for your date of loss. Florida's statute regulates bad-faith liability rather than demand content.

Pre-suit or post-suit? Pre-suit demands are faster and cheaper, and they are the only demands California's statute covers. Post-suit demands come with discovery, a better record on liability, and sometimes better information about the insured's assets, but they also come with defense costs that change the insurer's math. Watch the statute of limitations: a demand period that runs past the limitations date can force you to file suit while the demand is pending.

Are there other claimants? If one accident injured several people, a demand for the full per-accident limit by one claimant creates a problem for the insurer and for the insured. Expect the insurer to propose a global settlement conference, and consider whether to join it. If you represent more than one claimant, Model Rule 1.8(g) governs any aggregate settlement.

For the insurer

Do you have a coverage question? A coverage dispute does not suspend the duty to evaluate and respond. An insurer that wrongly denies coverage and refuses a reasonable settlement takes the risk of liability for the full judgment (Comunale v. Traders & General Insurance Co., 50 Cal. 2d 654 (1958)). If you need to reserve rights, do it in writing and keep evaluating the demand on the merits.

Who has authority? Identify the person with authority to pay the full limit and make sure the demand reaches that person well before the deadline. In Pavia v. State Farm Mutual Automobile Insurance Co., 82 N.Y.2d 445 (1993), the insurer's claims committee did not meet until months after the demand; the insurer escaped liability under New York's demanding standard, but in most states that delay would be a jury question.

Is there more than one claimant or more than one policy? If so, plan for allocation (a global conference, interpleader, or Florida's statutory options) from the beginning.

For defense counsel and the insured

Defense counsel: confirm in writing who your client is. In Texas, the insured alone is the client of the lawyer the insurer hires (American Physicians Insurance Exchange v. Garcia, 876 S.W.2d 842 (Tex. 1994)). Elsewhere you may represent both, but the insured's interest in avoiding an excess judgment is not negotiable. If the insurer has reserved rights on a ground you can influence, you may have a conflict; California requires independent counsel in that situation (Cal. Civ. Code § 2860).

Insured: decide whether to hire personal counsel. If your assets exceed the policy limits, or if the claim might exceed them, the answer is almost always yes.

Part One: Making the demand

Step 1: Confirm every policy and every limit

What to do. Ask the insurer in writing for the limits of every policy that may cover the claim: the primary auto or liability policy, any umbrella or excess policy, any employer's or vehicle owner's coverage, and any other policies covering any other potential insured. Ask for the declarations pages. Ask the insured, through the insurer, whether there is other coverage. Use statutory disclosure tools where available: Florida's Fla. Stat. § 627.4137 requires insurers to disclose limits on written request within 30 days, and Georgia's O.C.G.A. § 33-3-28 provides a similar mechanism. Once suit is filed, Fed. R. Civ. P. 26(a)(1)(A)(iv) requires initial disclosure of insurance agreements in federal court, and state rules usually do the same.

Why. A demand is effective only if it is within limits. If there is an undisclosed umbrella, a demand for the primary limit may be a demand for less than the total coverage, which changes the analysis; a demand for "all available coverage" made to an insurer that does not know the total may not be a demand within any particular policy's limits.

Pitfalls. Per-person versus per-accident limits; multiple insureds under one policy (the named insured, the permissive driver, the employer); and separate limits for different coverage parts (auto liability and general liability, for example). Also confirm whether the policy has a self-insured retention or a deductible the insured must pay.

Timing and cost. Usually one to four weeks. Little cost beyond letters.

Step 2: Build the evaluation package

What to do. Assemble what a prudent adjuster with no limits would want to see before paying the full limit: the crash report and photographs; witness statements; any citation or admission; the complete medical records (not summaries), itemized bills, and payment ledgers; wage loss proof; a treating physician's opinion on permanency and future care; and, for serious injuries, a life care plan or at least a narrative of future treatment. Organize the package with an index and a short liability and damages narrative.

Why. The claim must be supported by "reasonable proof" in California (Cal. Civ. Proc. Code § 999.1), and in every state the question is what the insurer knew when it decided. An insurer that had the records cannot later claim it needed them. An insurer that did not have them has a defense.

Authority. Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992) (insurer liable where the claimant supplied bills, physician notes, additional expenses, and the complete certified medical file); Graciano v. Mercury General Corp., 231 Cal. App. 4th 414 (2014) (no bad faith where the insurer moved quickly despite the claimant's own misidentification of the driver and policy).

Pitfalls. Sending a 2,000-page record dump without an index; withholding records that hurt (prior injuries); and leaving out the documents that show permanency, which is often the reason the claim exceeds the limits.

Timing and cost. Weeks to months, depending on treatment. Records costs can run from hundreds to a few thousand dollars, and a life care plan or expert narrative costs more. See Building a Damages Case: A Practical Guide from Pleading to Verdict.

Step 3: Identify and quantify liens

What to do. Identify every payer and lienholder: Medicare (traditional and Medicare Advantage), Medicaid, ERISA and other health plans, hospital lien claimants, workers' compensation carriers, and providers treating on a letter of protection. Request conditional payment information from Medicare and itemized lien statements from others.

Why. Insurers have legitimate reasons to insist on lien protection. Under 42 U.S.C. § 1395y(b), Medicare can recover conditional payments from a liability insurer that has already paid the claimant, and the regulations in 42 C.F.R. part 411 govern that recovery. California's statute requires that the demand offer to settle "all claims within policy limits, including the satisfaction of all liens" (Cal. Civ. Proc. Code § 999.1). A demand that addresses liens head-on removes the insurer's most common reason for not accepting.

Authority. Arkansas Department of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006) and Gallardo v. Marstiller, 596 U.S. 420 (2022) (scope of Medicaid recovery); Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006) and US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013) (ERISA plan reimbursement). For lien negotiation practice, see Personal Injury Claim Toolkit: Liability, Damages, Liens, and Settlement.

Pitfalls. Promising to "resolve liens" without identifying them; and assuming a Medicare Advantage plan has no recovery rights.

Timing and cost. Medicare conditional payment information can take weeks to arrive. Start early.

Step 4: Decide when to send the demand

What to do. Choose a date that gives the insurer a fair opportunity and gives your client the full benefit of the demand. In California, if you want the statute's protections and structure, the demand must go before the complaint is filed (Cal. Civ. Proc. Code § 999). Elsewhere, consider whether the evidence is ready, whether the limitations period allows the full response window, and whether Florida's 90-day safe harbor will apply.

Why. Demands sent too early, before treatment stabilizes or before the insurer could reasonably investigate, are the ones courts most often reject as setups (Pavia v. State Farm Mutual Automobile Insurance Co., 82 N.Y.2d 445 (1993)). Demands sent too late may follow defense spending that changes the insurer's incentives.

Pitfalls. Sending the demand during the insurer's first week on the claim; sending a demand that expires the day the limitations period runs; and failing to consider Florida's 90-day window, which means a Florida insurer that tenders within 90 days of receiving notice with sufficient evidence is protected from a bad-faith action, statutory or common law, in cases filed after March 24, 2023 (Fla. Stat. § 624.155(4)).

Step 5: Draft the demand to the governing statute

What to do. Write the demand so that it satisfies every requirement of the governing statute, even where the statute is not mandatory, and every common law element. The core elements are:

For Georgia, O.C.G.A. § 9-11-67.1 as amended in 2024 lists the only material terms of a pre-answer offer: an acceptance date at least 30 days after receipt, the amount, the parties to be released, whether each release is full or limited and what the claimant will provide each releasee, the claims to be released, a payment date at least 40 days after receipt, and a sworn statement on the recipient's coverage (which the offeror may waive); the offer must also include records sufficient to evaluate the claim, and any other term is immaterial. For Missouri, Mo. Rev. Stat. § 537.058 requires an acceptance period of at least 90 days from receipt, the amount or a request for limits, the date and location of loss, the claim number if known, all known injuries, the parties and claims to be released, an unconditional release, and a list of treating providers with HIPAA-compliant authorizations; any payment deadline must be at least 10 days after the insurer receives the executed release. Template language that meets the California, Georgia, and Florida requirements is in the Policy-Limits Demand Toolkit.

Pitfalls. Releasing only "your insured" when there are several insureds; leaving out a spouse's consortium claim; and using statute-specific terms in the wrong state.

Step 6: Set the deadline and the conditions

What to do. Pick a deadline at least as long as the statutory minimum and long enough for the volume of records and the complexity of the claim. Thirty days is common for clear-liability auto claims with complete records; 45 to 60 days is reasonable for complex injuries or multiple insureds. State the deadline as a calendar date and time zone. Limit conditions to those that protect the client: written acceptance, payment within a reasonable period after acceptance (21 to 30 days is common), an affidavit or statement of no other insurance from the insured, and lien satisfaction from proceeds.

Why. Every condition is a possible point of failure, and courts examine conditions to decide whether the demand was a real opportunity. Georgia held in Grange Mutual Casualty Co. v. Woodard, 300 Ga. 848 (2017) that the 2013 statute allowed payment deadlines as conditions of acceptance, but later amendments changed the rules; and in Cotton States Mutual Insurance Co. v. Brightman, 276 Ga. 683 (2003), a demand that also sought another insurer's limits did not excuse an insurer that failed to tender its own. Florida courts hold that a requirement of later court approval does not invalidate an offer (Berges v. Infinity Insurance Co., 896 So. 2d 665 (Fla. 2004)).

Pitfalls. Conditions that require action by people the insurer does not control; payee instructions that conflict with lien obligations; and deadlines measured from "receipt" when you cannot prove receipt.

Step 7: Deliver the demand and prove delivery

What to do. In California, send the demand to the email or physical address the insurer has designated with the Department of Insurance for time-limited demands, or to the assigned claims representative if known (Cal. Civ. Proc. Code § 999.2). In Georgia, send it by certified mail or statutory overnight delivery, return receipt requested, reference O.C.G.A. § 9-11-67.1, and state where a written acceptance may be sent. In Missouri, send it to the liability insurer by certified mail, return receipt requested, and reference Mo. Rev. Stat. § 537.058. Everywhere, send by at least two methods (email and a tracked delivery), keep proof, and send a copy to the insured's defense counsel if one is assigned. Consider sending a courtesy copy to the insured, with the insurer's knowledge, if no lawyer represents the insured.

Why. A demand that never reached the decision-maker is weak evidence of a lost opportunity. California's statute makes delivery to the right address part of compliance.

Pitfalls. Sending to a general claims inbox; sending only by regular mail, which in California adds three days; and calculating the deadline from transmission when the statute measures it from receipt.

Step 8: Manage the response period and the outcome

What to do. Calendar the deadline and interim check-ins. Answer specific questions quickly and in writing. Evaluate any extension request on the merits: if the insurer asks for a reasonable extension to obtain specific information, granting it usually costs your client little and strengthens any later bad-faith claim. If the insurer accepts, perform your side exactly. If it does not, confirm the expiration in writing and consult your client about next steps.

Why. The record you create in the response period is the record a court will read. In California, a request for clarification, information, or an extension is not a counteroffer or rejection (Cal. Civ. Proc. Code § 999.3), so you cannot treat it as one. Florida's 2023 amendments impose a duty of good faith on claimants and their representatives in furnishing information, making demands, setting deadlines, and attempting to settle, and allow the trier of fact to reduce damages for a failure (Fla. Stat. § 624.155(5)(b)).

Pitfalls. Refusing every extension on principle; ignoring an insurer's request for the insured's statement or asset information (in Harvey v. GEICO General Insurance Co., 259 So. 3d 1 (Fla. 2018), it was the insurer's handling of the claimant's request for the insured's statement that drove the verdict, and the same dynamics can cut the other way); and failing to tell the client that the insurer accepted.

Timing. Thirty to sixty days for the response period; another two to four weeks for payment and closing documents.

Part Two: Responding to the demand (the insurer)

Step 9: Log, calendar, and acknowledge the same day

What to do. Record the date and method of receipt, the stated deadline, and the date by which the claimant says acceptance must arrive. Calculate the deadline independently under any applicable statute (30 days from transmission by email, fax, or certified mail in California, 33 by regular mail; from receipt in Georgia; at least 90 days from receipt in Missouri). Route the demand to the adjuster and to a manager with full-limit authority. Send a short written acknowledgment to the claimant's lawyer confirming receipt and the deadline.

Why. A surprising share of bad-faith cases begin with a demand that sat unopened. An acknowledgment also fixes the deadline in writing and invites the claimant to correct any misunderstanding.

Pitfalls. Relying on the claimant's deadline calculation; failing to set an internal deadline several days before the real one; and allowing an acknowledgment to read as a rejection or counteroffer.

Timing and cost. Same day or next business day. Minimal cost.

Step 10: Check coverage and reserve rights if necessary

What to do. Confirm that the claim is within coverage, that all persons to be released are insureds, and that no exclusion applies. If there is a genuine coverage question, decide quickly whether to reserve rights. A reservation should be specific, in writing, and sent to the insured, with notice of the insured's right to independent counsel where state law requires it (Cal. Civ. Code § 2860).

Why. In Texas, the Stowers duty is triggered only by a claim within the scope of coverage (American Physicians Insurance Exchange v. Garcia, 876 S.W.2d 842 (Tex. 1994)). But an insurer that guesses wrong on coverage and refuses a reasonable demand risks liability for the entire judgment (Comunale v. Traders & General Insurance Co., 50 Cal. 2d 654 (1958)). Coverage uncertainty is a reason to act fast, not a reason to wait. If you decide to litigate coverage, consider a declaratory judgment action under 28 U.S.C. § 2201 and see Declaratory Judgment Actions: Jurisdiction, Discretion, and the Race to the Courthouse.

Pitfalls. A reservation of rights so broad it gives the insured grounds to settle on its own (in Arizona, an insured defended under a reservation can enter a Morris agreement, United Services Automobile Ass'n v. Morris, 154 Ariz. 113 (1987); in Minnesota, a Miller-Shugart agreement, Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982)); and letting the coverage unit and the claims unit work on different timelines.

Step 11: Tell the insured and defense counsel

What to do. Within a few days of receipt, send the insured an excess exposure letter: a copy of the demand, the deadline, a plain statement that the claim may exceed the policy limits and that any excess would be the insured's personal responsibility, the insured's right to retain personal counsel at the insured's own expense, an invitation to contribute to settlement or to tell the insurer about other insurance, and a request for any information the claimant has asked for. Copy assigned defense counsel. Document the insured's response.

Why. Florida's duties include advising the insured of settlement opportunities, the probable outcome, the possibility of an excess judgment, and steps the insured might take to avoid it (Boston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980)). Nevada requires insurers to inform the insured adequately of settlement offers, including those above limits (Allstate Insurance Co. v. Miller, 125 Nev. 300 (2009)). In every state, the excess letter is Exhibit A in showing that the insurer gave the insured's interests equal consideration.

Pitfalls. Excess letters sent only in English to an insured who reads another language; letters that understate the risk; and failing to relay the claimant's requests for the insured's statement or asset information. Harvey v. GEICO General Insurance Co., 259 So. 3d 1 (Fla. 2018) reinstated a bad-faith verdict where the adjuster did not promptly relay the claimant's request for a statement about the insured's assets and other coverage and did not pass along the insured's message that he was working to provide it.

Step 12: Evaluate the demand under the correct standard

What to do. Evaluate liability and damages with the record you have, and decide whether the jurisdiction's standard requires acceptance. Ask the questions your jurisdiction asks:

Record the evaluation in writing, including the range of likely verdicts, the probability of an adverse liability finding, and the reasons for the decision. Obtain a written evaluation from defense counsel if one is assigned.

Why. In a later bad-faith case, the claims file will be discovered and the evaluation will be compared to the verdict. An evaluation that ignores the most serious injury, as the hypothetical in the companion article shows, is the worst possible exhibit.

Pitfalls. Valuing only the injuries the insurer thinks are causally related while ignoring a jury's likely view; letting reserve figures drive the evaluation; and failing to consider defense costs and interest.

Step 13: Ask for information or time, correctly

What to do. If you need more information, ask for it specifically, in writing, well before the deadline, and explain why you need it. If you need more time, ask for a specific extension in the same letter, and say that the request is not a rejection or counteroffer. In California, cite Cal. Civ. Proc. Code § 999.3, which provides that a request "to seek clarification or additional information or a request for an extension due to the need for further information or investigation," made within the acceptance period, is not "in and of itself" a counteroffer or rejection. In Georgia, the statute permits a request for reasonable clarification without converting acceptance into a counteroffer (Grange Mutual Casualty Co. v. Woodard, 300 Ga. 848 (2017) discusses that provision). Keep working on the claim while you wait.

Why. Courts distinguish insurers that asked sensible questions within the deadline from insurers that did nothing. In Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992), the insurer "did not seek more time to evaluate the claim or respond to the offer before it expired." In Ilias v. USAA General Indemnity Co., 61 F.4th 1338 (11th Cir. 2023), the insurer's alleged failure to confirm for the claimant's lawyer that the insured had no other coverage, which the lawyer needed before releasing the insured, created a jury question.

Pitfalls. Asking for "all medical records" when you already have them; asking on day 29; and assuming an extension will be granted.

Step 14: Accept, tender, or reject in writing

Accepting. Accept the material terms "in their entirety" in writing (Cal. Civ. Proc. Code § 999.3) and on time. Match every condition: the payee, the payment amount, the method, the deadline, the release form, the affidavits. If you want a two-party check or a lien indemnity, propose it as a mechanism for performing the accepted terms, not as a condition of acceptance, unless the demand itself is silent on liens. Calendar payment. In Georgia under the 2013 statute, a late payment that the offer made an essential condition of acceptance meant there was no settlement (Grange Mutual Casualty Co. v. Woodard, 300 Ga. 848 (2017)).

Tendering with reasonable conditions. If the demand has a defect (an incomplete release, no lien provision, an impossible condition), consider tendering the limit with reasonable conditions that cure the defect, and explain why each condition is needed. A tender that offers the full limit and asks only for a full release and lien protection is hard to characterize as bad faith. In Florida, a tender of the lesser of the limits or the amount demanded within 90 days after notice with sufficient evidence is a statutory safe harbor (Fla. Stat. § 624.155(4)). Georgia's 2024 amendments add a similar protection: no failure-to-settle action lies if, by the dates in the offer, the insurer accepts the material terms other than amount in writing, provides any required sworn coverage statement, and pays the lesser of the amount demanded or its bodily injury limits (O.C.G.A. § 9-11-67.1(i)).

Rejecting. If you decide not to accept, say so in writing before the deadline and explain the basis. In California, the statute requires it, and the notice "shall be relevant" in any later bad-faith suit (Cal. Civ. Proc. Code § 999.3). Elsewhere, a written explanation is still the best evidence that the decision was considered rather than neglected.

Multiple claimants. If several claimants share a per-accident limit, propose a global settlement conference promptly, keep all claimants informed, and consider interpleader under 28 U.S.C. § 1335, 28 U.S.C. § 2361, or Fed. R. Civ. P. 22. Texas allows a reasonable settlement with one claimant even if it diminishes the limits available to others (Texas Farmers Insurance Co. v. Soriano, 881 S.W.2d 312 (Tex. 1994)). Interpleader allocates the fund but does not control tort litigation against the insured (State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523 (1967)). Florida's amended statute provides a safe harbor for insurers that interplead or offer limits in binding arbitration within 90 days after receiving notice of competing claims that exceed the limits (Fla. Stat. § 624.155(6)). For a recent example of an insurer that tendered the per-accident limit for division at a global conference within about a month and prevailed, see Martinez v. GEICO Casualty Co., No. 24-10641 (11th Cir. Sept. 23, 2025). Interpleader procedure is explained in Adding Parties to a Federal Lawsuit: Joinder, Intervention, Impleader, and Interpleader.

Pitfalls. A counteroffer below limits on a clear-liability claim; an acceptance with "subject to" language; and a check issued in the wrong name.

Part Three: Defense counsel's role

Step 15: Protect the insured inside the tripartite relationship

What to do. When a demand arrives (or when you learn of one), send the insured a copy with a letter explaining the deadline, the excess exposure, your evaluation, and the insured's right to personal counsel. Send the insurer a written evaluation and, if warranted, a recommendation to accept. If the insured asks you to urge settlement, do so in writing. If the insured and insurer disagree, follow the guidance of ABA Formal Opinion 96-403 and your state's rules on conflicts, and advise the insured to retain personal counsel.

Why. The defense lawyer's duty of loyalty runs to the insured. Model Rule 1.8(f) permits a third party (the insurer) to pay the lawyer only if there is no interference with the lawyer's independent judgment, and Model Rule 1.7 governs the conflicts that arise when the insurer's interest in saving money diverges from the insured's interest in avoiding excess exposure. Your reports to the insurer are likely to be discoverable in any later bad-faith case.

Pitfalls. Treating the insurer's claims professional as the client; staying silent when you think the insurer is making a mistake; and advising the insured about coverage disputes with the insurer that is paying you. For a fuller treatment of conflicts, see Legal Ethics in Practice: Conflicts, Confidentiality, Fees, and the Duty of Technological Competence.

Part Four: The insured's choices

Step 16: Get personal counsel and put your position in writing

What to do. Retain personal counsel when you receive an excess letter. Through counsel, write to the insurer asking it to accept the demand within limits, and state that you will hold it responsible for any excess judgment. Cooperate fully: give statements, answer asset questions, and provide information about other insurance. If the claimant makes an above-limits offer, decide with counsel whether to contribute personal funds. Do not settle directly with the claimant without advice about your policy's cooperation clause and your state's rules on consent judgments.

Why. An insured's written demand that the insurer settle is powerful evidence in a later bad-faith case. And the insured's cooperation matters: an insured who refuses to give a statement the claimant needs can create the very problem the insured fears. Texas held in In re Farmers Texas County Mutual Insurance Co., 621 S.W.3d 261 (Tex. 2021) that an insured who contributes to a settlement may have a contract claim against the insurer even though there is no Stowers claim without an excess judgment.

Pitfalls. Ignoring the excess letter; hiding assets; and signing a stipulated judgment that your state will not enforce against the insurer (Hamilton v. Maryland Casualty Co., 27 Cal. 4th 718 (2002) in California; State Farm Fire & Casualty Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996) and Great American Insurance Co. v. Hamel, 525 S.W.3d 655 (Tex. 2017) in Texas).

Step 17: If the demand expires

What happens. The claimant usually files suit (or proceeds with the pending suit) and tries the case. If the verdict exceeds the limits, the insurer pays its limit and the insured faces the excess. The insured may then assign its bad-faith claim to the claimant in exchange for a covenant not to execute, and the claimant sues the insurer, often in federal court on diversity under 28 U.S.C. § 1332, or the insurer removes a state-court filing under 28 U.S.C. § 1441 and 28 U.S.C. § 1446. Federal courts apply state substantive law (Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938)) and the forum's choice-of-law rules (Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487 (1941)), and may certify open questions to the state supreme court, as in Macola v. Government Employees Insurance Co., 953 So. 2d 451 (Fla. 2006) and Grange Mutual Casualty Co. v. Woodard, 300 Ga. 848 (2017). Summary judgment under Fed. R. Civ. P. 56 is often decisive (Eres v. Progressive American Insurance Co., 998 F.3d 1273 (11th Cir. 2021); Ilias v. USAA General Indemnity Co., 61 F.4th 1338 (11th Cir. 2023)).

Where the insurer refused to defend or reserved rights, the insured may instead enter a pre-trial agreement: a Coblentz agreement (Coblentz v. American Surety Co. of New York, 416 F.2d 1059 (5th Cir. 1969)), a Damron or Morris agreement in Arizona (Damron v. Sims, 105 Ariz. 151 (1969); United Services Automobile Ass'n v. Morris, 154 Ariz. 113 (1987)), a Miller-Shugart agreement in Minnesota (Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982)), a covenant judgment in Washington (Besel v. Viking Insurance Co. of Wisconsin, 146 Wash. 2d 730 (2002)), or a statutory agreement in Missouri (Mo. Rev. Stat. § 537.065). Each requires that the settlement be reasonable and free of fraud or collusion, and several states refuse to bind a defending insurer to such a judgment.

For the claimant, assess collectability. An assigned bad-faith claim is valuable only if the bad-faith case can be won, which depends on the record you built in Steps 1 through 8. For the insurer, consider whether to pay the excess judgment rather than litigate bad faith, and preserve the claims file.

Timeline and cost table

Worked example: Park v. Greenway Grounds

The claimant's side. Reyes sends Greenway's insurer a written request for the limits of every policy covering the truck, the driver, and Greenway, citing O.C.G.A. § 33-3-28. The insurer confirms a single $1 million commercial auto policy and no umbrella. Reyes identifies a hospital lien, an ERISA health plan's reimbursement claim of $96,000, and no Medicare involvement. He waits until Park's neurologist and neuropsychologist issue written opinions on permanency (about seven months after the crash), then assembles a package with the police report, two eyewitness statements, the driver's recorded admission that he "didn't see her," indexed medical records, itemized bills of $268,000, the ERISA plan's lien letter, a vocational assessment, and a life care plan.

Reyes drafts a pre-suit offer that recites the seven material terms of O.C.G.A. § 9-11-67.1(b)(1) as amended in 2024: an acceptance date 30 days after receipt; $1 million; release of Greenway, the driver, and the vehicle's owner; a full release, with an itemization of what Park will provide each releasee (a signed general release and an indemnity covering all liens, to be satisfied from the proceeds); release of all of Park's bodily injury claims; a payment date 45 days after receipt; and a sworn statement, due on the same date, on whether all of the insurer's coverage has been disclosed. He puts nothing else in the offer, because any other term would be immaterial. He encloses the records the statute requires, references the Code section, and gives a mailing address and an email address for acceptance. He sends it by certified mail, return receipt requested, and by email to the assigned adjuster, and copies Greenway's defense counsel (none yet) by sending a copy to Greenway's owner with a cover note suggesting he share it with any lawyer he retains.

The insurer's side. The adjuster logs the demand on the day the receipt is signed, calculates the deadline from receipt, and sends an acknowledgment confirming the date. Within three days she sends Greenway's owner and the driver an excess exposure letter with a copy of the demand and a recommendation to consult personal counsel. Coverage is clear. On day 12 she writes to Reyes asking for two things: confirmation that the ERISA plan's lien is the only health plan claim, and the vocational expert's wage-loss calculation, which was summarized but not attached. She states that the request is for clarification and is not a counteroffer or rejection, and asks for a 10-day extension if the wage-loss calculation cannot be provided within a week. Reyes sends the calculation on day 15 and confirms the lien picture. On day 22, with manager approval, the insurer accepts in writing, matching every term, and proposes that the lien be satisfied by a separate check to the plan from the settlement amount at Reyes's direction. The sworn coverage statement and payment both arrive before the stated dates. Park receives her settlement, net of fees and the negotiated lien, about 11 weeks after the demand.

The alternative. Suppose instead the adjuster had sent a letter on day 28 offering $600,000 and stating that "the claimed cognitive injury is not causally related." Reyes would have let the offer expire and filed suit. If a DeKalb County jury later returned $4.2 million, Greenway would face a $3.2 million excess judgment. Greenway's owner, through personal counsel, would assign the bad-faith claim to Park for a covenant not to execute, and Park would sue the insurer. The questions under Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992) and Cotton States Mutual Insurance Co. v. Brightman, 276 Ga. 683 (2003) would be whether a reasonably prudent insurer, giving Greenway's interests the same faithful consideration as its own, would have accepted a $1 million demand on a clear-liability TBI claim supported by complete records. The day-28 letter, which neither asked for information nor explained the causation position with evidence, would be the centerpiece of Park's case.

Common mistakes

Claimants

• Demanding before confirming every policy and insured.
• Omitting a co-insured or a consortium claim from the release.
• Using conditions that serve no client purpose.
• Ignoring liens, or promising to resolve them without identifying them.
• Sending to the wrong address, especially in California.
• Refusing reasonable extension requests on principle.

Insurers

• Letting the demand sit in an inbox.
• Calculating the deadline from the wrong date.
• Failing to tell the insured, or to relay the claimant's requests to the insured.
• Counteroffering below limits on a clear-liability claim with catastrophic injuries.
• Asking vague or unnecessary questions, or asking at the last minute.
• Accepting with conditions, or paying late or to the wrong payee.
• Failing to explain a rejection in writing.

Defense counsel and insureds

• Defense counsel treating the insurer as the only client.
• Insureds ignoring excess letters and refusing to cooperate.
• Insureds entering consent judgments their state will not enforce.

FAQ

Can a claimant's lawyer refuse every extension request? Yes, but it is rarely wise. In California, the request is not a counteroffer, and a refusal followed by a bad-faith claim invites the argument that the claimant did not want a settlement. In Florida, the 2023 amendments make the claimant's good faith in setting deadlines and furnishing information relevant to damages (Fla. Stat. § 624.155(5)(b)). Grant reasonable, specific extensions; refuse open-ended ones.

What if the demand arrives after suit is filed in California? The statute does not apply, because it covers only demands made before a complaint or arbitration demand is filed (Cal. Civ. Proc. Code § 999). The common law of Comunale v. Traders & General Insurance Co., 50 Cal. 2d 654 (1958), Crisci v. Security Insurance Co., 66 Cal. 2d 425 (1967), and Pinto v. Farmers Insurance Exchange, 61 Cal. App. 5th 676 (2021) governs. Most insurers and claimants follow the statute's structure anyway.

Can an insurer accept the demand but insist on its own release form? Usually only if the form matches the material terms of the demand. If the demand specifies a release, accept it or propose changes as clarifications within the deadline. A different release can turn an acceptance into a counteroffer.

Should a demand go to the insured too? If the insured is represented by personal or defense counsel, send it to counsel. If not, a copy to the insured, with notice to the insurer, can help the insured understand the stakes. Do not use that communication to advise the insured; Model Rule 4.3 governs dealings with unrepresented persons.

What if the insurer tenders the limit after the demand expires? The claimant may refuse. Whether the late tender defeats a bad-faith claim depends on the jurisdiction and the facts. In Pavia v. State Farm Mutual Automobile Insurance Co., 82 N.Y.2d 445 (1993), a late offer did not establish bad faith under New York's gross-disregard standard. In Southern General Insurance Co. v. Holt, 262 Ga. 267 (1992), an insurer that let a demand expire and then offered the limits was still liable. In Macola v. Government Employees Insurance Co., 953 So. 2d 451 (Fla. 2006), a tender after a civil remedy notice did not bar a Florida common law bad-faith claim.

Is an insurer required to make a settlement offer if no demand arrives? Texas and Georgia say no (American Physicians Insurance Exchange v. Garcia, 876 S.W.2d 842 (Tex. 1994); First Acceptance Insurance Co. of Georgia v. Hughes, 305 Ga. 489 (2019)). Florida allows bad faith to be inferred from unreasonable delay in negotiations even without a formal demand where liability is clear and damages exceed the limits (Powell v. Prudential Property & Casualty Insurance Co., 584 So. 2d 12 (Fla. 3d DCA 1991)). Insurers in Florida should consider initiating settlement in clear excess cases.

Do I need a lawyer to make a policy-limits demand? California's statute does not apply to unrepresented claimants (Cal. Civ. Proc. Code § 999.4), and the drafting and timing decisions in this guide are hard to get right without experience. For people handling their own claims, see Handling a Personal Injury Claim Without a Lawyer: A Practical Guide.

Takeaways

• For claimants: complete coverage information, complete records, lien protection, statutory compliance, achievable conditions, provable delivery, and responsiveness during the response period.
• For insurers: log, acknowledge, notify the insured, evaluate under the right standard, ask specific questions early, and accept, tender, or explain in writing before the deadline.
• For defense counsel: the insured is your client; tell the insured about the demand and its risk, and put your evaluation in writing.
• For insureds: get personal counsel, cooperate, and put your demand that the insurer settle in writing.
• After expiration, the record created during the response period decides the bad-faith case.

The checklist version of these steps, with deadlines, is the Policy-Limits Demand Checklist: A Practical Checklist. For general negotiation sequencing, see Planning and Running a Litigation Settlement Negotiation: A Practical Guide, and for the release that follows acceptance, Drafting a Settlement Agreement and Release: A Practical Guide.

This document is general information, not legal advice for any particular situation; time-limited demand statutes and bad-faith standards vary by state and change frequently, so confirm the current text and case law before acting.

Related Documents

Related Articles

• Policy-Limits Demands and Insurer Bad Faith: How Time-Limited Demands Set Up Excess Verdicts: the doctrine and case law behind each step.
• Settlement Negotiation Tactics: Principled Negotiation, Anchoring, and Handling Hardball in Litigation: dealing with hard deadlines and take-it-or-leave-it offers.
• Car Accident and Personal Injury Claims: From the Crash to the Check: the underlying claim from start to finish.
• Business Insurance and Coverage Disputes: CGL, E&O, Cyber, and D&O: coverage and duty-to-defend issues for business insureds like Greenway.

Related Guides

• Planning and Running a Litigation Settlement Negotiation: A Practical Guide: negotiation planning beyond the demand.
• Building a Damages Case: A Practical Guide from Pleading to Verdict: proof of the damages that make a limits demand reasonable.
• Handling a Personal Injury Claim Without a Lawyer: A Practical Guide: the unrepresented claimant's perspective.
• Drafting a Settlement Agreement and Release: A Practical Guide: the release that closes an accepted demand.

Related Checklists

• Policy-Limits Demand Checklist: A Practical Checklist: every task in this guide, with deadlines and red flags.
• Insurance Claim and Bad Faith Checklist: A Practical Checklist: claim handling issues more broadly.
• Personal Injury Claim Intake and Evaluation Checklist: A Practical Checklist: deciding early whether a limits demand fits the case.
• Settlement Agreement Checklist: A Practical Checklist: closing documents after acceptance.

Related Toolkits

• Policy-Limits Demand Toolkit: Demand Letters, Insurer Responses, and Excess Exposure Letters: templates for every letter in this guide.
• Personal Injury Claim Toolkit: Liability, Damages, Liens, and Settlement: demand packages and lien reduction letters.
• Settlement Negotiation Toolkit: Case Valuation Worksheets, Concession Plans, and Offer Letters: valuation worksheets for testing a demand.
• Insurance Coverage Toolkit: Placing, Tendering, and Litigating Claims: tender and reservation-of-rights correspondence.