When Should You Sue an Insurance Company
Not all insurance companies are created equal, or work in the same way. This becomes evident when you’re filing a claim with the insurance company. What type of insurance company is it? Is it online or an actual chain store? The type of store can make a huge difference. Yet so can the claim you are making and your insurance policy.
How Do You Know When to Sue an Insurance Company? When you are denied a legitimate claim by your insurance company, you have been victimized. Here are some other instances when you can sue your insurance company: • If the insurance company denies a claim that clearly should have been covered. The carrier is acting in bad faith and you have every right to sue. • Denied wind damage claims. Too often after a hurricane or weather system, the insurance company is anxious to deny any and all claims. You have to put up a fight, but it’s worth it. • Unexplained denial of liability. If none of the above criteria are met but the liability is still denied, you need to consult an attorney. Reputable insurance companies don’t normally make claims they cannot back up. In fact, they are very clear to cover themselves beforehand telling you exactly what is covered in tune with the law. • Delays in payment. Sometimes there are unexpected delays. • Harassment. If you are treated poorly, it is possible that you might be victim to harassment, especially if you are a vulnerable person or a senior. • Refusal to pay late fees after payment is overdue . • If the insurance company requires unreasonable amounts of documentation in addition to the documentation already provided. • Refusal to return overhead costs. • Refusal to reimburse certain costs • If the insurance company asks you to help investigate the loss, then they deny your claim. • Knowing the law and trying to use it in your favor.
How To Sue an Insurance Company One way to sue the insurance company is to go to court. If you win, you can be assured that the insurance company will not go away quietly. They will fight back. In the event you lose, you may be obligated to pay their legal fees. To minimize your chances of being on the losing side of a lawsuit it’s important to be sure that you have a legitimate claim and that you are sure that they owe you money. It is not wise to go up against an insurance company without a firm understanding of your rights and a good attorney to go with it. Once you are certain that you have cause to sue the insurance company, the next step is choosing the right attorney. Some attorneys only deal with insurance company suits. There is also the possibility of an out-of-court settlement. Sometimes the insurance company will make a financial offer before the case goes to trial or with the attorney. This is often a good strategy for both parties. While insurance companies hate to fork over money, they also would like to avoid trial if possible. If they feel they can win the case, they will hold out.
What Bad Faith Insurance Practices Are
Much of what happens in a standard lawsuit against an insurance company takes place pursuant to the regulations set forth by state law. It is these regulations that explain, for instance, how long an insurance company has to investigate a claim or issue a payment. Following these regulations is so important that when an insurance company violates them, it is said to have acted in "bad faith." The term "bad faith," ordinarily pertaining to the breach of a fiduciary duty, has a more specific application here. Applied to an insurance claim, bad faith is said to have occurred when the insurance company violated a requirement under the terms of the insurance policy and did not correct the violation. Sometimes, a violation is only temporary or one-time when the actions took place. In other cases, a violation is ongoing. An unreasonable delay in payment may be enough to establish bad faith.
Examples of violations include: Failure to investigate a claim properly. For a claim to be valid, an insurance policy may require the insurance company to complete certain actions, such as interviewing certain people who may be witnesses, completing a full evaluation of damages, and obtaining supporting documentation. Unjust claim denials. Sometimes, the insurance company simply denies a claim without sufficient cause, even after its own investigation. An insurance policy may require that certain steps be taken if there is strong evidence pointing to the fact that coverage exists—instead of, for example, putting off these steps until more information explicitly shows that coverage does not exist. Unreasonable delays. With a significant amount at stake, even an insurance company can face negative consequences if it delays its payment for an unreasonable amount of time. While this is subjective, it does not mean that subjective-based lawsuits are impossible to win. To win a bad faith lawsuit, you must still prove that the insurance company violated its duty to investigate a claim, a duty to pay a claim when coverage clearly exists, or an unreasonable delay in payment of a claim.
Steps Before Filing a Lawsuit
Although there are some situations where suing the insurance company is warranted – such as ongoing bad faith or long-term wrongful denial of claims – most of the time filing a lawsuit should be your last resort. A court case could take months or years to settle in addition to needing money upfront to file a lawsuit and pay your lawyers. You also face the risk that you may lose again and end up on the hook for the defendant’s attorney’s fees. It would be best if you exhausted other options before jumping to this potentially costly and time-consuming step.
Here are some steps you should take before filing a lawsuit:
These three steps will prepare you for the mediation or arbitration process, help you out when these alternative dispute resolution processes fail, and ultimately help if you end up taking your case to small claims or filing a formal lawsuit.
The Process for Suing an Insurance Company in Court
After exhausting administrative avenues, the injured party may file a lawsuit in civil court. A complaint is filed and a summons issued to the insurance company. The complaint refers to the matter being sued and states a prayer for relief or compensation from damages such as the underpayment or denial of a claim. The defendant is entitled to 30 days to respond, in writing, to the complaint. The response is called an answer, and it addresses the allegations of the complaint. Once the answer is filed, the parties begin the discovery process.
During the discovery process, all parties are entitled to discover pertinent information from the other party. Each party may request the other to produce documents, answer written questions (interrogatories), and submit to deposition. A deposition is a testimony of a witness that is recorded by a court reporter. For example, a policyholder who is asserting claims or the insurance adjuster may be chosen to appear at a deposition. It is recommended that an attorney be present when a party is deposed. Additionally, the party may request access to witnesses identified by the insurance company with potentially relevant information. Prior to a trial, the judge may grant the parties motions for summary judgment to move the case forward. If the judge does not grant a motion for summary judgment, then the matter proceeds to trial. A judge or jury will determine the outcome of the case.
Any civil case not settled or completed prior to trial is brought before the docket at the local courthouse for adjudication. A jury trial is a common occurrence in these cases where a jury of six to twelve people hears and decides controversies between parties. In some cases, the decision is made by a judge. In this situation, a magistrate presides instead of a judge over certain matters relating to insurance claims.
Getting an Attorney for Your Insurance Claim
Yet another option for filing an insurance claim lawsuit is to hire an attorney who specializes in helping people file insurance claims. In many instances, this type of attorney can see your claim through to trial. The other benefit of hiring a specialist is that such attorneys usually have it within their lawyer’s fee agreements to also collect a percentage of any amount they recover for their clients.
An insurance specialist’s job is to investigate and evaluate any evidence that is submitted by the claimant. These specialists will look at the evidence you have collected and told them about to determine how likely it is that your lawsuit will be successful. They can then tell you how likely they think it is that you will win your case based on the evidence and provide you with a rough estimate of what they think that you should recover. If you accept their assessment, you can hire the specialist to pursue your case .
One way to locate such an attorney is to check your local Yellow Pages. There may be an attorney listed in your area under "insurance attorneys." You can contact the attorney to learn whether or not the law firm takes your case. Another way to locate one is to contact your state bar association and ask for recommendations to lawyers who handle insurance claim lawsuits. The bar association may provide you with the names of several lawyers and their telephone numbers.
One issue you should know before you go out to hire an attorney is that hiring this type of attorney will be expensive. Although you may not pay the attorney any money at the beginning of the case, he or she will take a certain percentage of your recoveries if the claim is successful. Because litigating a case costs money, the attorney will front that cost for you. This could mean thousands of dollars in the end if your claim is successful.
Outcomes and Settlements
If your claim is accepted after suing the insurance company you will obtain benefits, obviously, if the court rules otherwise then you will generally receive nothing and your case is over. Generally, if the case is in federal court and you win, the insurance company will be responsible for attorney fees and costs, on top of the damages in the claim. If in state court, that is generally not the case.
If you do not win, it does not necessarily mean your case was poor or even weak at the time of filing. As noted above, the first case is often heard by a less informed judge who does not understand the issues at hand. Thus your case could be strong, but the judge simply does not believe it to be.
The insurance company will only offer settlements if they believe the case is a certain loss. They will not offer a settlement if there is a reasonable chance they will win. The case in becoming litigation, the less likely a settlement becomes. But in relatively strong cases, you might receive an offer during the course of litigation, but generally you will receive no such offer once the case is on appeal.
Your compensation in such a case may come from damages, costs, and, in a rare few cases, punitive damages. The damages will be equal to the benefits you are owed, the cost would cover your out of pocket expenses, or at least some of them, and the punitive damages would only come into play if the insurance company acted egregiously.
An insurance company always acts reasonably when a claim is filed. They may deny first, but will almost never seek penalties for filing a lawsuit. Generally, such an action may open them up to further liability.
Dangers of Suing an Insurance Company
One of the key drawbacks to legal action against anyone is that it is expensive. The cost of hiring a lawyer and other legal fees like court fees, etc. can add up quickly. Insurance companies want to make money; it is the basis for their entire business plan. If you are suing an insurance company, then you should expect that they will go above and beyond to protect their money and try to fight back against your case. They may make it more difficult for their insured to sue them because they do not want to risk losing lots of money in a lawsuit.
For example, if you fail one aspect of the lawsuit, the insurance company is likely to argue that you failed to meet your burden of proof on all issues, thereby completely dismissing your case . In contrast, you may argue that the insurance company is knowingly withholding benefits or acting in bad faith, and therefore not in the best interest of the injured party. The burdens to prevail against insurance companies versus prevailing against other non-insurance companies are very different. Insurance companies, like most businesses, will protect their business aggressively. Therefore, if you think something has gone wrong, you should consult with a lawyer, if not immediately, as soon as possible so that they can prepare for the future challenges.