Insurance policies give the insurance company exclusive control over the defense and settlement of claims against their insured (An “insured” person is someone who purchased an insurance policy).
In some cases, lawsuits against insurance companies seek damages exceeding policy limits. There is a conflict of interest between the insurance company’s duty to the insured and their desire to limit their payouts.
A conflict of interest may arise for an insurance company when a person sues the company for damages over the policy limits, and there is an offer to settle the case for less than the policy limits. The insurance company may reject the settlement offer and take their chances in court to minimize their overall payout.
The person with insurance would prefer not to deal with further court proceedings. An insured who purchased a policy with stated limits expects to be able to pay a settlement within the policy limits. Any amount over the policy limits may be liable at trial if the insurance company refuses to settle.
An insurance company has a duty of good faith to accept a reasonable settlement offer if it falls within the policy limits. In addition to considering both the insured’s and the company’s best interests, the insurance company has a duty of good faith.
People often sue their own insurance companies for a variety of reasons. It is important to understand the legal relationship between the person who purchases insurance and their insurance company in order to understand why it is possible to sue an insurance company.
Insurance is essentially a contract (the “insurance policy”) in which one party pays a premium in exchange for the other party (the “insurer”) providing coverage for the insured. An insurance company will protect the insured in the event of a loss caused by an event covered by the policy.
As a result, there is a legal contract between an insured, who agrees to pay a premium for coverage, and the insurer, which agrees to protect the insured in the event of a covered event.
Lawsuits often arise when an insurance company fails to indemnify or protect the insured from an act covered by the policy or when the insurance company otherwise fails to fulfill its obligations, such as by wrongfully denying a claim.
Prepare yourself before filing a lawsuit against your insurance company by gathering all necessary documents and following the proper procedure. It is your responsibility as an insured to inform your insurance company that a covered incident has occurred by filing an insurance claim with the company.
You can notify your insurance company by phone, online, or in writing if a triggering event occurs. You may consider filing a lawsuit against the insurance company if they deny your claim or fail to pay on time.
In order to file a lawsuit against your insurance company, you must follow these steps:
If you do not have an experienced attorney by your side, suing an insurance company can be a long and difficult process. You can expect your insurance company to delay paying your claim if they have grounds to deny it.
Insurance companies, however, are required by law to pay out claims in a timely manner. Prior to filing a lawsuit, it is important to submit your claim to the insurance company in writing properly. Moreover, federal law holds that insurance companies owe their insureds an implied covenant of good faith and fair dealing.
When an insurance company breaches its duty of good faith and fair dealing, such as by wrongfully denying a properly filed and covered claim, the insured may recover not only their actual claim damages but punitive damages as well.
The most common legal issue with insurance companies is an insurance company wrongfully denying an insured’s claim.
In many instances, an insurer’s denial of an insured’s claim is valid under the insurance policy. For example, in an automobile case dealing with car insurance, the insurance company may deny an insured’s claim if it is shown that the insured was responsible for the accident or grossly negligent.
In a home insurance case, an insured’s homeowner policy is meant to provide coverage for the insured’s property in cases where the property suffers certain damage. An insurance company might deny a homeowner’s claim if the homeowner caused damage to their own property. For example, if the homeowner intentionally set fire to their own property or purposefully flooded it.
There are several legal theories and reasons why an insured may sue their insurance company:
A court will award you damages if you sue your insurance company and succeed in your lawsuit. A breach of contract lawsuit is the most common legal theory for suing an insurance company.
If you win a breach of contract claim, you are entitled to actual damages, which include what you were supposed to receive. Additionally, some jurisdictions allow for the recovery of out-of-pocket expenses, such as attorneys fees and, in some cases, punitive damages.
If you feel that your insurance company has handled your claim in bad faith, an experienced insurance attorney can help. In addition, an attorney can help you if your insurance company has not acted in your best interest or has cost you money.
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