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Suing an Insurance Company

Filing a policy claim with your insurance company can be a difficult and intimidating process. Many people feel pressured and helpless when a massive insurance corporation refuses to pay on a policy, and think there is no way to contest it. However, insurance companies must obey the law like everyone else. It is important to know your rights to sue an insurer.

My Insurance Company Recently Denied My Claim. What Do I Do Next?

First, request that they send, in writing the denial and detailed reasons as to why the claim was denied. It is important to try to get everything you can in writing, for two reasons:

  1. In case of a lawsuit, detailed reports of your transactions be useful evidence
  2. A company engaged in potentially questionable practices (such as bad faith ) may be more hesitant to document its actions. Asking for documentation may cause them to approve the claim.

Next, file for an immediate appeal or administrative hearing with the insurer. While it is unlikely that the company will reverse its own decision, it is essential that you do this to comply with the terms of your insurance policy to exhaust all available remedies.

What If My Appeal Was Turned Down?

Remember to ensure your policy actually does cover the damage you are dealing with, as many people wrongfully assume that they are covered when they are not. For instance, many people mistakenly think that homeowner’s insurance covers flood damage, only to be left without coverage when a flood damages their home.

What Can I Sue For?

There are two major categories of lawsuits against insurance companies: those for breach of contract, and those for acting in bad faith.

  • Contract Breach Lawsuits . All you must prove is that the terms of your policy were not followed by the company. Many states have laws that construe ambiguous terms in a contract in favor of the policy holder. However, most states limit breach of contract damages only to the value of the actual contract. They can also sometimes grant you out of pocket expenses you incurred because of the insurer failing to pay, and may allow attorney’s fees as well.
  • Bad Faith Lawsuits allow for many more types of damages than simple contract breaches, including consequential, mental or emotional stress damages, and, if the companies conduct was egregious, punitive damages .

However, the standard of proof is also much higher, as you must prove the company acted in bad faith. A legitimate dispute or disagreement over coverage or benefits will likely not give rise to a bad faith claim.

Should I Contact a Lawyer About Disputing a Claim?

If you may have a legal case against your insurance company, you should contact an experienced attorney immediately. Your lawyer will help you understand the likelihood of winning a lawsuit against your insurance company.

Last Modified: 02-12-2014 03:04 PM PST





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