California Insurance Code §11580 requires every liability policy issued or delivered in California to include a clause that:
a.Mandates a $1,000,000 minimum liability limit on every policy issued in the state, with proof of that limit filed with the Department of Insurance each year
b.Allows a judgment creditor to bring a direct action against the insurer after obtaining a final judgment against the insured
c.Prohibits the insurer from subrogating against its own insured or the insured's household members
d.Limits attorney's fees to 10% of the total recovery in any third-party liability claim, with any fee above that share refunded to the claimant within 30 days of settlement
Explanation
Section 11580(b)(2) requires every California liability policy to permit a third-party judgment creditor, after obtaining a final judgment against the insured judgment debtor and after the insured's insolvency or bankruptcy, to bring a DIRECT ACTION against the insurer up to the policy limits. This protects injured plaintiffs when the insured cannot pay personally.
Law Reference: Cal. Ins. Code §11580(b)(2)This topic, taught in full in the California Property & Casualty Broker-Agent guide. California Property & Casualty Broker-Agent Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
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