business success

Can You Sue an Insurance Company?

by Josh Biggs in Tips on 22nd December 2019

Whether it’s auto insurance, health insurance, or some other kind of insurance, you pay a lot for the coverage you are supposed to receive. So what happens if you are in an accident or have a health issue and you need coverage yet your insurance company denies it? Are there ways you can sue or go about getting help to recover damages?

The following is a guide to what to know about suing an insurance company.

Why Would You Sue an Insurance Company?

As was touched on, there are some reasons you might consider suing your insurance company.

When you have insurance of any kind, there is a legal contract between you and the company providing the coverage. An insurance company is required to provide coverage in exchange for the payment of premiums. If there is a loss that occurs and your insurance company doesn’t cover it, issues including a lawsuit may arise.

You can technically sue your insurance company if they fail the terms of your policy.

Examples of violations that may lead to the filing of a lawsuit against an insurance company include making bad faith claims, not paying properly filed claims, and not paying claims in a timely way.

What Is Insurance Bad Faith?

Insurance companies owe what’s called a duty of good faith to customers who pay them for coverage.

When an insurer doesn’t uphold their duties, which is sometimes done in order to maintain profits, it’s called bad faith. Ways that insurers can engage in practices of bad faith include misinterpreting the language of their own policies on purpose, using delays that are seen as unreasonable to avoid resolving a claim, making arbitrary demands to show proof of laws, or asking an insured person to contribute to a settlement. Other examples include the use of abusive tactics or not conducting a comprehensive investigation.

When the duty of good faith is breached, it may lead to a lawsuit.

There are first-party insurance claims, as well as third-party bad faith.

With first-party bad faith, the insurer refuses to pay without having investigated a claim or without having a reasonable basis for not doing so. Third-party insurance bad faith claims related to liability insurance.

The insurer has a duty to pay all the defense costs even if the policy doesn’t cover a lawsuit.

Reasons Insurance Companies Deny Claims

There are a wide variety of reasons an insurance company could deny a claim. Some of these are considered legitimate, and others aren’t. Common reasons are:

  • You may not have coverage for your claim under your policy, or your insurance company could argue that at least. If there is ambiguous language in your policy, cases typically go more in favor of the policyholder as opposed to the insurance company.
  • If there are misrepresentations on your application for the policy, it may make your coverage null. Even if there weren’t misrepresentations or inaccuracies an insurance company might argue there were.
  • Insurance fraud can be a reason a company says they deny your claim.

Taking Legal Action Against An Insurance Company

If you are thinking about taking legal action against your insurance company, there are different laws and statutes in each state that determine exactly what type of lawsuit you can file. Every state does make an allowance for a breach of contract lawsuit because your insurance policy is in and of itself a contract.

You may be able to file a bad faith tort lawsuit, and there are certain states where you could file a suit under unfair trade practice laws.

Suing a Health Insurance Company

A lot of times we associate suing an insurance company with car insurance or something like homeowners or flood insurance, but what about health insurance companies?

Sometimes a health insurance company may turn down your claim, leaving you wondering if legal options are open to you.

First, you should always make sure you go through the necessary steps to appeal a health insurance decision. This includes an internal review with your insurance company, and then there will likely also be a second internal review.

You may also have your case go through an external review before a decision on your appeal is made.

If you still don’t win your appeal, you can speak with a lawyer about a formal lawsuit.

In order to file a formal lawsuit, you will need to bring a lawyer to your insurance policy, a log of all communication you’ve had with the insurance company, and all of the documents you received during all review processes.

Similarly to other types of insurance, one of the reasons you may have a case against your health insurance company is a bad faith insurance claim.

While there are instances when you could have a viable case against an insurance company, you shouldn’t take these situations lightly, nor without the help of an experienced lawyer.

An insurance company will have their own lawyer, and the situation can escalate quickly, particularly if lawyers are aggressive on both sides.

You may have issues if the insurance company doesn’t want to continue working with you on other areas of coverage as well.

Most insurance-related cases are settled in mediation, but they can go to court, and if they go to trial, it can take anywhere from one to three years for resolution.

Before considering any kind of lawsuit against an insurance company, you need to have a clear idea of why you were denied coverage. You will also need to realize that your case will hinge on having strong supporting evidence.

Insurance companies have the objective of protecting their profits, and they are going to fight you as much as they can. The insurance company is also going to ask you to comply with a myriad of different requests, and if you don’t handle these correctly you may lose the basis for a claim so it’s sometimes better to contact a lawyer sooner rather than later when it comes to insurance issues.

Categories: Tips