There are many reasons why a person may seek to sue their own insurance company, and people sue their insurance companies often. In order to understand why it is possible to sue an insurance company, you have to realize the legal relationship between the person who purchases insurance (the “insured”) and their insurance company.
Insurance is essentially a contract (the “insurance policy”) in which one party agrees to pay a premium in exchange for the other party (the “insurer”) to provide coverage for the insured. In the event that a loss occurs due to an event that was covered by the insurance policy, the insurance company will protect the insured from any losses, damages, or liability.
Therefore, a legal contractual relationship exists between an insured, the person who agrees to pay a premium for coverage, and an insurer, the company/group which agrees to protect the insured if a covered event occurs.
Thus, lawsuits often arise when an insurance company does not indemnify, or protect, the insured from a covered act under the policy or when an insurance company otherwise does not fulfill their end of the contract, such as by wrongfully denying an insurance claim.
How Do I File a Lawsuit Against My Insurance Company?
Before filing a lawsuit against your insurance company, it is important to ensure that you are prepared by first gathering all necessary documents and following the proper process. Although it may seem obvious, you should first notify your insurance company of your claim by filing an insurance claim with the company, as it is your duty as the insured to let the insurance company know that a covered incident has occurred.
You may notify your insurance company by either a phone call, an online claim form, or in writing after a triggering event occurs. If the insurance company denies your claim or fails to timely pay, and you believe that the denial was incorrect, then you may consider filing a lawsuit against them.
After you decide to file a lawsuit against an insurance company, you should perform the following steps:
- Request that your insurance company provide you with a full copy of your insurance policy, if you do not already possess it;
- Send a written letter to your insurance company requesting them to send in writing their denial of your claim and a detailed reasons as to why your claim was denied, as well as demanding they payout your claim;
- Allow your insurance company a reasonable time to respond to your demand for payment, as they may offer a fair settlement;
- File for an administrative hearing regarding your insurance claim denial with your insurer. This is an important step as your insurance policy may contain a section regarding you “exhaust all available remedies” before filing a civil lawsuit, and your failure to do so may result in your lawsuit being dismissed; and
- If all administrative and out of court options fail, you should then file a civil lawsuit against your insurance company seeking they pay out your claim.
Without an experienced attorney you can expect the process of suing an insurance company to be long and difficult. The insurance company will want to delay paying your claim, especially if they have grounds for denying the claim.
However, insurance companies are required by law to timely pay out a properly filed insurance claim. Thus, it is important to first properly submit, in writing, your claim to the insurance company, before filing suit. Additionally, federal law holds that insurance companies owe their insureds an “implied covenant of good faith and fair dealing.”
When an insurance company breaches their duty of good faith and fair dealing, such as by wrongfully denying a properly filed and covered claim, then the insured may recover not only their actual claim damages, but punitive damages as well.
What Are Some Common Legal Issues that Happen with Insurance Companies?
As mentioned above, one of the most common legal issues that happens with insurance companies is an insurance company wrongfully denying an insured’s claim under the insurance policy.
However, there are many instances in which 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. However, an insurance company may deny a homeowner’s claim if they were the reason that their property suffered damages. For instance, an insurance company may validly deny a claim if the homeowner committed arson to their own property or purposefully flooded their property.
The following is a list of several legal theories and reasons of why an insured may sue their insurance company:
- Failure to pay on time: As mentioned above, insurance companies have a duty to act in good faith. Therefore, if an insurance company does not make reasonable efforts to timely pay your properly filed claim, then the insured may be able to make a bad faith claim. Another bad faith may occur when an insurance company offers an unreasonably low amount of money to settle a claim.
- Failure to represent: Another common reason why an insured may sue their insurance company is if their insurance company refuses to defend them in a lawsuit against them, as provided under the insurance policy. Further, if the insurance company accepts an unreasonably low settlement for the insured’s claim while representing them, the insured may also have a bad faith claim against the company.
- Breach of contract: The most common legal theory that insurance companies are sued upon is a breach of contract theory. An insured may sue their insurance company if the company fails to follow the terms of the insurance policy.
How Long Does it Typically Take to Sue an Insurance Company?
How long it usually takes to sue an insurance company will vary depending on many different factors of each unique case. When a case is handled quickly, it may be resolved in one year or even less.
It is common for these types of cases to take at least two years. However, if there are delays or issues during the case, it may take even longer.
It is important to note that, at any time after the lawsuit is filed, the parties involved can come to a settlement agreement that ends the case.
What Are the Costs Associated with Suing an Insurance Company?
The costs that are associated with suing an insurance company will vary by case and by attorney who is hired. In many personal injury cases, an attorney will use a contingency fee schedule, which means the client will not pay unless the attorney wins.
There are, however, costs that the client may typically be required to pay no matter what fee schedule their lawyer uses, such as:
- Court fees and filing fees
- Expert witness fees
- Administrative fees
- Deposition costs;
- Investigation and information gathering costs
It is important for a client to be aware of the specific details of the fee agreement with their lawyer. In some situations, the client will not be required to pay the costs listed above unless their lawyer wins and they are deducted from the settlement or award.
In other situations, however, the agreement may provide that the client is required to pay certain fees, such as the filing fee, regardless of whether they win or lose their case.
What Are Some Remedies Available in an Insurance Claim Lawsuit?
If you choose to file a civil lawsuit against your insurance company, and succeed in your lawsuit, then a court will award you damages. As mentioned above, the most common legal theory for suing an insurance company is a breach of contract theory.
When you succeed in a breach of contract claim, you are first entitled to actual damages, which includes what you were supposed to receive under the contract. Additionally, some jurisdictions allow for the recovery of out of pocket expenses, such as attorneys fees, and in some cases punitive damages.
For example if a homeowner properly made a claim under their homeowners policy for covered damage to their property and the insurance company wrongfully denied their claim, and delayed tendering payment, the insured could recover the value of the property claim, the attorney fees associated with pursuing the claim, as well as possible punitive damages as a remedy.
How Can I Improve My Chances of Winning a Lawsuit Against My Insurance Company?
There are several steps an individual can take to help improve their chances of winning a lawsuit against their insurance company, including:
- Reviewing and understanding their policy
- Notify the insurance company of the issue or claim as soon as possible
- Not admitting fault for anything
- Not speculating and sticking to the facts
- Being cooperative through the process
- Knowing the rough value of their claim
- Getting everything in writing and keeping detailed records
- Do not feel pressured to accept the first offer
- Hire an attorney as early as possible
- Allowing the attorney to communicate on your behalf with others
One of the most important steps an individual can take is to keep documentation of any correspondence with the insurance company or their representatives. This can include keeping copies of written correspondence and taking written notes about phone conversations, including names and dates.
An individual should always assume their call is being recorded. An individual should also keep records of any expenses they incur related to the issue, such as healthcare expenses, lost wages, repairs, and attorney’s fees.
An individual should choose a lawyer who has experience with insurance litigation. These types of cases can be expensive, complex, and time-consuming.
Do I Need to Hire an Attorney When Filing a Lawsuit Against an Insurance Company?
Although not a requirement for filing a lawsuit against your insurance company, an experienced insurance attorney may be in your best interests, in order to make sure that your claim is taken seriously and that you receive the best remedy for your situation.
Further, because insurance laws and remedies vary by state, consulting a knowledgeable and well qualified attorney is crucial in order to ensure that you have a valid claim, and that your claim is handled expediently. An experienced attorney will be able to help you negotiate with your insurance company, file a lawsuit on your behalf, and represent you in court, if necessary.
