Policy limits of an at-fault party’s insurance, knowing exactly what those limits are can make or break a bad faith case. Policy limit discovery is the process of uncovering the maximum amount an insurer will pay on a liability policy.
For plaintiffs and their lawyers, effective policy-limit discovery is more than a tactical tool—it is often essential leverage. Below, we explore the legal foundations, common obstacles, and strategic approaches for compelling disclosure in bad faith insurance matters.
The Legal and Ethical Stakes
At its core, a bad faith claim arises when an insurer unreasonably refuses to settle within policy limits, thereby exposing the insured (and itself) to an excess judgment. Courts recognize that an insurer’s duty to act in good faith requires it to evaluate settlement opportunities responsibly—especially when liability is clear and damages are likely to exceed Policy Limit Discovery.
A key problem, however, is information asymmetry: claimants often must make settlement demands “in the dark,” without knowing how much coverage is realistically available. By withholding policy-limit information, insurers may retain tactical advantages. As one IRMI analysis explains, nondisclosure “forces the third-party claimant to negotiate in the dark and make a demand without benefit of knowing what is potentially available.”
In some jurisdictions, failing to disclose policy limits—or refusing to seek insured consent for prelitigation disclosure—can itself form the basis of a bad faith claim, especially if it appears that the carrier is prioritizing its own interests over those of its insured.
Statutory and Jurisdictional Landscape
Whether and when an insurer must reveal policy limits to a third-party claimant depends heavily on jurisdiction. Some states mandate pre-litigation disclosure, while others require disclosure only after a lawsuit is filed.
Mandatory Pre-suit Disclosure: In Florida, for example, statute requires insurers to disclose, within 30 days of a written request, the limits for all known policies (including umbrella or excess), any known coverage defenses, and a copy of the policy.
Restricted Disclosure by Law: California offers a contrasting model. Under California Insurance Code § 791.13, an insurer must obtain the insured’s written consent before releasing policy limits to a third-party claimant. Moreover, courts have held that refusing to even ask the insured for consent can constitute bad faith—such a “blanket rule” of nondisclosure may create a conflict of interest.
Discovery Through Litigation: In states without strict pre-suit disclosure laws—such as many others beyond Florida and California—claimants commonly resort to formal discovery after filing a lawsuit. Courts typically recognize that policy documents are discoverable under standard rules (e.g., document requests, interrogatories, depositions).
Strategic Tools for Forcing Disclosure
Given this landscape, claimants’ attorneys can employ a variety of strategies to compel insurers to disclose policy limits and strengthen a potential bad faith claim.
Demand Letters Before Litigation
Where applicable by statute or precedent, send a formal, written demand letter requesting policy-limit disclosure. Include relevant evidence such as accident reports, medical documentation, and a statement of damages.
If the insurer delays or refuses, document every communication. These written records can later form part of a bad faith claim, showing that the insurer frustrated a good-faith resolution by withholding coverage information.
Use a time-limited demand (sometimes called a “time-limit demand” or “policy limits demand”) to pressure the insurer: make clear that the demand expires after a set period unless the limits are disclosed and the claim is resolved.
Invoke Statutory Rights & Cite Jurisdictional Law
Reference and cite the specific state statute (if one exists) in your letter. For example, use Florida Statute 627.4137 when making a disclosure request there.
Where courts have recognized a duty to seek insured consent (e.g., in California Boicourt v. Amex), cite those decisions to frame nondisclosure as potential bad faith.
Litigation and Formal Discovery
Once a lawsuit is filed, utilize interrogatories and requests for production to demand all relevant insurance policies, including excess or umbrella coverage.
Take depositions of insurer representatives or adjusters to explore why policy limits weren’t disclosed earlier or whether the insurer contacted the insured regarding disclosure consent.
Use motions to compel if necessary: if the insurer resists, ask the court to mandate production of the declarations page and policy documents.
Exposing Conflict of Interest
Investigate whether the insurer has a blanket policy of never seeking the insured’s consent to disclose limits. In Boicourt v. Amex Assurance Co., the court held that such a blanket rule could itself be evidence of bad faith.
Gather internal insurer materials during discovery (claims manuals, internal correspondence) to show systemic practices or policies that favor nondisclosure, delay, or tactical obfuscation.
Leverage Mediation & Settlement Negotiation
Use known policy limits (once disclosed) as a negotiation anchor in mediation. By showing that damages substantially exceed coverage, you can pressure the insurer to tender the full limit to avoid an excess judgment.
Document all pre-mediation discussions: if the insurer refuses to negotiate meaningfully or misrepresents coverage, this record strengthens a bad faith claim later.
Emphasize the risk to the insured: remind both insurer and insured that exposure to excess judgment puts personal assets at risk, and that withholding limits may backfire.
Public and Ethical Pressure
Consider adverse publicity or regulatory leverage: in some jurisdictions, bad faith exposure may attract regulatory scrutiny, especially if the insurer’s practices appear systematic.
Use moral persuasion: frame the request to defensive counsel or adjusters in terms of fairness, transparency, and the insured’s best interest—not just as a litigation gambit.
Risks and Pushback from Insurers
Insurers, for their part, have several counter-arguments and defenses they commonly raise:
Confidentiality & Privacy: Insurers may argue that policy limits are proprietary or personal between insurer and insured, especially in jurisdictions like California.
Lack of Legal Obligation: In states without pre-litigation disclosure statutes, insurance companies may refuse to disclose limits until discovery compels it.
Conditional Demands: Insurers may push back that the claimant’s demand is not “reasonable” or is contingent on other factors. For example, some policy-limit demands require releases, additional information, or cooperation from third parties. Courts have recognized that certain conditions may validly justify refusal to pay immediately.
Waiving Privileges: Insurers may be wary of revealing full policy language, arguing that it could waive underwriting information or privileged internal communications.
To counter these, claimants’ attorneys must be precise in their demands and persistent in discovery, ensuring they request only what is relevant (e.g., declarations page, endorsements) and resisting overbroad resistance.
Why Policy Limit Discovery Matters in Bad Faith Litigation
Improves Settlement Leverage
By knowing coverage limits, claimants can calibrate their demands, making it harder for insurers to lowball or stonewall. It also gives leverage: if an insurer refuses to pay within limits, it risks an excess judgment and a bad faith suit.
Builds the Bad Faith Record
Early demand letters, refusal to communicate, or inert behavior by the carrier become part of a documentary record. When combined with discovery of internal practices, they help establish the insurer’s bad faith conduct.
Highlights Insurer-Insured Conflict
An insurer that refuses to check with its insured or prioritizes denying disclosure may expose itself to conflict-of-interest claims. That conflict often lies at the heart of bad faith theories.
Reduces Risk for Claimants
Knowing policy limits avoids over- or under-demanding. It ensures that claimants do not unwittingly settle for less than what the insurer is willing or able to pay, or risk a bad-faith fight without proper leverage.
Practical Take-Home Recommendations
Research your jurisdiction: Before demanding limits, know the applicable statutes, court precedents, and discovery rules.
Send a formal, written demand: Backed by documentation and framed in statutory or case-law terms, such a demand often triggers a response—or at least lays the foundation for litigation.
Be ready to litigate: If pre-suit disclosure fails, file suit promptly to start formal discovery. Use interrogatories, document requests, and depositions aggressively.
Gather internal evidence: Look for systemic practices or policies that reveal how insurers handle limit-disclosure requests.
Leverage negotiation wisely: With limits in hand, make informed, strategic settlement demands. Use mediation to press the insurer to act responsibly.
Document everything: Every letter, email, internal discussion, and delay can be used later to support a bad faith claim.
Conclusion
Policy limit discovery is more than a technical step in litigation—it’s a cornerstone of maximizing recovery and holding insurers accountable. By understanding the legal landscape, deploying precise and forceful strategies, and building a strong evidentiary record, claimants and their counsel can not only protect the insured from excess exposure but also set the stage for a robust bad faith case if the insurer refuses to play fair.
