A more thorough explanation:

Definition: Excess theory is a principle in insurance that states that if the damages caused by a tortfeasor (someone who commits a wrongful act) exceed the amount of liability insurance coverage they have, they will be considered underinsured. This principle allows the injured party to use underinsured-motorist coverage to cover the remaining damages.

Example: Let's say that a driver causes an accident that results in $50,000 in damages to the other driver's car and medical bills. However, the driver only has liability insurance coverage for up to $30,000. In this case, the excess theory would apply, and the driver would be considered underinsured for the remaining $20,000 in damages. The injured party could then use their underinsured-motorist coverage to cover the remaining damages.

Another example: A doctor is sued for medical malpractice and has liability insurance coverage for up to $1 million. However, the damages awarded to the plaintiff are $2 million. In this case, the excess theory would apply, and the doctor would be considered underinsured for the remaining $1 million in damages. The plaintiff could then use their underinsured-malpractice coverage to cover the remaining damages.

Overall, excess theory is an important principle in insurance that helps ensure that injured parties are able to receive the compensation they need, even if the tortfeasor's insurance coverage is not enough to cover all of the damages.