What Happens If You're Sued for More Than Your Insurance Covers?

If a Canadian court awards more than your policy limit, your insurer pays its limit — often $1 million — and you personally owe every dollar above it. Canadian courts have awarded $12 million and even $18 million against ordinary drivers, so the gap between "what the policy pays" and "what you owe" can be life-altering. The judgment doesn't vanish when the insurance money runs out: it attaches to your wages, your home equity, and your savings, and in most provinces it can be renewed and enforced for decades.

Here's the whole timeline, from the day the claim arrives to the day the sheriff does — and the one dynamic that decides whether it ever gets that far.

Step 1: The claim comes in bigger than your limit#

Most serious injury claims start the same way: a statement of claim naming you personally, with a damages figure that makes your policy limit look small. That figure isn't invented for shock value. In catastrophic injury cases, the bulk of a Canadian award is cost of future care and loss of future income — decades of attendant care and lost earnings, priced by economists. Pain and suffering is actually the small part: the Supreme Court capped non-pecuniary damages in 1978 (Andrews v. Grand & Toy and the trilogy), and that cap sits around $450,000 today even for the worst injuries.

That's how MacNeil v. Bryan (Ontario, 2009) reached roughly $18.4 million against a 16-year-old driver, and how Morrison v. Greig and Gordon v. Greig (2007) produced awards of about $12.3 million and $11.4 million from a single crash. None of those defendants were wealthy. The awards were sized to the injuries, not the wallet.

Step 2: Your insurer defends you — until the money runs out#

The moment a covered claim lands, your insurer takes over. It hires the lawyers, pays them, and controls the defence. This is genuinely valuable — defence costs in a serious injury claim run well into six figures, and under most Canadian policies they're paid in addition to your limit.

But the duty to defend has an expiry point most people never read: under most policy wordings, it ends when the insurer pays out its full limit. If the claim is worth $3 million and your limit is $1 million, your insurer can pay the $1 million into the claim and step away — legally finished — while the case against you continues. From that day forward, the lawyers defending the remaining $2 million of exposure are hired and billed by you, at several hundred dollars an hour, for a case that may run years.

That's the first shock for most defendants: not the judgment, but the moment they realize the meter is now running on them personally, before anything has even been decided.

Step 3: The excess limits letter arrives — and your interests can start to diverge#

An excess limits letter is the notice a Canadian insurer commonly sends once it recognizes a claim is genuinely likely to exceed your policy limit. There's no single mandatory format — it may come from an adjuster, defence counsel, or the insurer directly — but the content is always the same warning: this claim may be worth more than your policy pays, and you may have personal exposure. If you get one, it means the file has moved from routine to serious, and it's the moment procedural advice matters as much as the underlying facts.

Here's the part almost nobody explains: your insurer and you generally want the same thing, but not always identically. Your insurer wants to resolve the claim for as little as possible, up to its limit — a rational goal, since anything above the limit is no longer its money. You want the entire claim resolved, including the part above the limit, because that part comes out of your own assets. Those goals mostly overlap. They stop overlapping in specific situations: a settlement opportunity within your limit that the insurer is slow to accept, a defence strategy built around minimizing the insurer's exposure rather than the total judgment, or a case where the insurer's own conduct in handling the claim becomes an issue. Canadian courts do recognize a duty of good faith in how insurers handle claims, including exemplary damages for genuinely bad-faith conduct (Whiten v. Pilot Insurance Co., SCC 2002) — which is precisely why the divergence, when it happens, is worth having a second set of eyes on.

That second set of eyes has a name: independent excess limits counsel — a lawyer you retain separately from the lawyer your insurer appointed, specifically to watch the slice of the claim above your limit. Your insurer-appointed lawyer's job is the defence of the claim as a whole; independent excess counsel's only job is your personal exposure. Who pays for it varies by situation and is worth asking about directly — in some cases the insurer contributes, in others it's a personal cost, and a lawyer can tell you which applies to yours in an initial consultation.

If you're at the very start of this process — the claim was just filed — see what to do in the first hours after being served with a statement of claim. For the deeper walkthrough of this letter and exactly when to hire your own lawyer, see What Is an Excess Limits Letter — and Does My Insurer's Lawyer Work for Me?

Step 4: The judgment is against you, not your insurer#

If the case goes to judgment for more than your limit, the arithmetic is brutal and simple:

1. Insurer pays its limit — say, $1 million.
2. Court has awarded, say, $2.5 million.
3. You personally owe $1.5 million, plus post-judgment interest that starts accruing immediately at a rate set by provincial rules.

The judgment is a court order naming you. It doesn't care that you "had insurance." It cares that the insurance ran out.

Step 5: Enforcement — what a judgment creditor can actually do#

A judgment isn't self-executing; the plaintiff has to collect it. Canadian provinces give judgment creditors a well-worn toolkit, and a motivated plaintiff's lawyer knows every tool in it:

Two details deserve emphasis. First, the writ against your home is quiet but suffocating — nothing dramatic happens, but every sale, refinance, or estate transfer hits a wall until the judgment is dealt with. Second, renewal means time doesn't save you. Waiting out a judgment is not a strategy in Canada; a creditor who renews on schedule can still be garnishing your wages when your kids are in university.

Step 6: Why bankruptcy is a terrible escape hatch#

"I'll just go bankrupt" is the reflex answer, and it's much worse than it sounds:

• Bankruptcy takes your assets first. The process starts by handing your non-exempt assets — home equity above your province's modest exemption, non-registered investments, TFSAs — to a trustee for your creditors. You don't protect the house by going bankrupt; you surrender it through a different door.
• Your income gets tapped too. Bankrupts above the surplus-income threshold make monthly payments to the estate, and higher income stretches the bankruptcy out.
• Discharge isn't automatic when the debt is huge. Creditors can oppose your discharge, and courts can delay it or attach conditions — including ongoing payments — especially where the bankrupt has earning power.
• Some judgments survive bankruptcy entirely. Federal law carves out awards for intentionally inflicted bodily harm and sexual assault, among others. Those follow you out the other side.

An ordinary negligence judgment can eventually be discharged — but only after the process has consumed everything the law doesn't exempt, which for most families is precisely the assets they were hoping to keep. Bankruptcy isn't a shield. It's a controlled demolition.

Why does having more assets make you a bigger target?#

Here's the dynamic that actually decides most of these cases, and almost nobody explains it.

Plaintiff lawyers are practical. Before pushing a claim past your policy limits, they ask one question: can this defendant actually pay? They can search title on your home, and a debtor examination will surface the rest. What they find drives the strategy:

Read that table again, because it contains the cruellest irony in Canadian liability.

How much does closing the gap actually cost?#

The exposure above your limit is exactly what a personal umbrella or excess liability policy exists to absorb. For a typical Canadian household, an extra $1 million of protection runs roughly $200–$300 per year, and each additional million costs about $50–$75 per year — estimates based on typical broker pricing, not quotes. A $5 million policy — sized to what Canadian courts actually award in catastrophic cases — is usually still cheaper per month than a single streaming subscription.

More importantly, a bigger limit changes the settlement math from step one: when the coverage is large enough to pay the claim, there's no reason for anyone to come after your house at all. The policy doesn't just pay the judgment. It makes you boring to sue.

The starting point is knowing your gap: what a realistic judgment against you looks like, minus what your current policies would pay. For most people, nobody has ever run that number.