When Can You Sue Insurance Companies?
There are some valid reasons a car insurance company can end up being sued, and it’s important to understand them so that you don’t waste your time or money pursuing a lower-value claim. Aside from an auto accident claim, there are other agreements a claimant can have with their car insurance company that could be grounds for a lawsuit.
One of the most common grounds for filing a lawsuit against your auto insurance company is bad faith. Bad faith occurs when an insurance company fails to act in the best interest of its policyholder and violates the contract. An insurer might review the particulars of a claim only to determine that it will not pay any benefits to its insured under any circumstance. The insurer won’t communicate their decision to the insured properly, and will focus on using any method available to quickly close the file and walk away from the claim.
The insurer simply acts in the best financial interests of itself to deny any claim against it, rather than in the best interests of their policyholder. When it denies the claim, the provider also denies all related medical expenses and puts its policyholder in a very inconvenient position. It forces them to pay for medical bills out of their own pocket and delays the claimant from receiving the benefits they are entitled to.
A policyholder might have coverage for a rental car per the terms of their auto insurance policy, but the insurance company fails to pay for a rental car after an accident and the insured is left without any source of transportation . When the insured files an appeal for the rental car, the insurer quickly and easily denies the use of a rental vehicle through a documented letter, which may or may not explain the denial.
Another reason an auto insurance company can be sued is if its policyholder has their auto insurance policy canceled after a significant period of their policy being renewed without any major broker or claim complaints. An auto insurance broker ends up dropping its client due to nonpayment of their premiums after the broker fails to notify the insured of unpaid premium payments on the policy. The broker essentially denied coverage by falsely stating regular premium payments were made.
Insurance companies can be sued if they fail to pay damage costs incurred by their policyholder within a reasonable amount of time. If the insurer continues to cite reasons for delays, the insured can cite the reasons as bad faith and sue.
It’s possible for a claimant to sue an insurance company for intentionally delaying the payment of a claim due to lack of a response from the insurer. An insurer needs to respond to a claimant quickly and never delay a claim for any reason that could be justified as discrimination or prejudice against the insured. A claim can be made for damages surrounding the discrimination or prejudice if it can be proven why their response was delayed.
Policyholders have the right to make small claims against their auto insurance provider without needing an attorney. If a claim is too high in value or successful settlement is not met, a state insurance board can be contacted.
What to Do Before Filing a Lawsuit
Before you sue the car insurance company, you should take time to make sure that you’ve exhausted all of your options. You’ll want to be certain that the case is one that can be won before you invest your time and additional money in a lawsuit. First, you should read your car insurance policy thoroughly. If you’re unsure of the meaning of any term used in your insurance document, you may want to seek additional clarification from your insurance agent. Next, review all correspondence from your car insurance company, as well as documents related to your insurance claim. If you did not receive the policy documents in full, consider requesting the missing pages from your car insurance company. Make copies of the documents so that you can reference them throughout your case. Third, keep careful records of all communication between you and your car insurance company. This includes correspondence in both written and electronic format, such as text messages. If possible, document all phone conversations, including dates of contact as well as the names of the representatives you speak with. Your attorney will use this information to demonstrate that you made every attempt to resolve the matter with your insurer before filing a lawsuit.
How to Bring an Insurance Company to Court
When faced with the need to sue an insurance company, the legal process will require an individual to file a formal complaint with the appropriate court. The purpose of this complaint is to state the reasons for suing the insurance company. In these types of cases, the person or entity filing the lawsuit is known as the plaintiff, while the insurance company defending the matter is referred to as the defendant. Once the complaint has been filed, the insurance company will be served with a copy so they are aware of the accusation being made against them.
During this time, the discovery process will be initiated in order to gather more information about the situation and help build a case. During the discovery process, the plaintiff may request certain documents or information from their insurance company regarding the situation they are facing. It is during this which the plaintiff may attempt to negotiate a fair settlement regarding the matter.
If the plaintiff and insurance company can’t agree on a negotiated settlement, the court will represent both parties through mediation and arbitration. The case may go to trial should mediation and arbitration fail to resolve the matter. It’s essential that the plaintiff seek legal counsel to help negotiate the lawsuit.
Suing an Insurance Company: Costs and Fees
Suing a car insurance company may, in some instances, be the only option available to someone who has suffered an injury, or has had their car damaged in a traffic accident. However, it’s generally an option much better avoided. If an insurance company refuses to settle a claim or meet your needs, a lawsuit is just one option among many. Generally, the first thing you should try is to work things out with your adjuster, and if that fails, with a supervisor.
It helps to know what you can expect from a lawsuit . Law firms do not usually initiate lawsuits unless they believe they have a strong case. Even then, do not expect things to move quickly. In fact, the process may take a few years. Failing to adequately plan for the time commitment involved can be disastrous.
Lawyers can also be expensive. Most law firms will require a retainer, which must be paid immediately. This is often several thousand dollars. This may be paid in monthly installments, depending on the law firm and the case. Many will also charge a contingency fee, which comes from the settlement or award at the end of the lawsuit.
How to Select the Right Lawyer
A skilled attorney can help you get the most out of your claim through negotiations, or if necessary, suit. As our premise assumes (and the bulk of our firm’s case load attests to), it is best to hire a qualified auto insurance lawyer to handle your case because of the expertise that making insurance claims requires. An attorney with experience in automobile insurance matters can best help you navigate the system and bring a timely complaint or suit. Auto insurance cases have time limits which can bar your claim if you do not act promptly; knowledgeable legal counsel can help you make sure your case is handled properly.
However, "experienced" does not always mean what it sounds like, and you would do well to find out what "experienced" means to the attorney you are interviewing. Be sure to clarify whether the attorney has actual trial experience or if there is a particular area of insurance that is the attorney’s main practice. If the latter is the case, your auto insurance claim may not get the attorney’s full attention. You should also ask the attorney when he or she last represented an insured. It is always good to know when your attorney last litigated an insurance matter.
Another matter to know is how the attorney expects to be paid for services. Not all attorneys are willing to accept a case on a contingency fee basis. If the attorney you are contemplating hiring is not agreeable to a contingency fee arrangement, you should find out if hourly legal services are achievable for you or whether the attorney will charge a flat fee for the case. An oft-overlooked matter is how the attorney will be billing you—in increments of 15 minutes, 30 minutes, or by the hour, so be sure to get this important detail straight.
Finally, in the interview process, it is important to be up front with the attorney about how much you can reasonably spend on legal fees. An experienced, practical attorney should advise you on the best course of action for your case and how much the service will likely cost. Be wary of attorneys who might deceive you into thinking that you have a strong case that will require counsel through trial and possibly an appeal; this can cost you thousands of dollars.
The Possible Outcomes of the Lawsuit
When suing a car insurance company, there are a variety of outcomes that are possible. A successful outcome could involve winning a settlement. Alternatively, a judge or jury may rule in favor of the plaintiff and award damages. In some cases, a plaintiff may not need to file an actual lawsuit and is instead offered a chance to utilize an alternative dispute resolution system such as arbitration.
If a settlement is reached, which often occurs before a lawsuit is filed, it can be beneficial to the injured party. In many cases, it is deemed too costly by the insurance company to go through the litigation process. If an amount of compensation is agreed upon, it is offered to the plaintiff.
An award of damages can be the result of either a court ruling or a decision from a jury. The decision is based on many factors including the presiding judge’s opinion, the jury’s findings, compensation awarded in similar cases as well as evidence presented at trial . Such awards can be monetary or involve other remedies such as the transfer of property or the issuance of an injunction.
As an alternative, there are many insurers who offer to participate in an arbitration program. For someone to accept said agreement, the plaintiff must be willing to waive their right to litigation. Once this is done, the insurance company and the plaintiff will choose an arbitrator. This arbitrator will hear the arguments from both sides as well as any evidence presented and make a decision regarding the outcome.
Since an insurance company is not legally obligated to enter into an arbitration agreement, the process is entirely voluntary. However, when both parties agree to this option, it can benefit them by allowing them to avoid costly litigation and a lengthy trial while still providing a resolution.
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