Sue an Insurance Company After an Auto Accident

If you were in a car accident and the insurance company denied your claim, then you may be able to sue the insurance company for a “bad faith denial” of your claim. However, before trying to win in court, you should try to settle the matter with the insurance company out of court. A successful suit against your insurance company will require that you show the insurance company did not satisfy its duty of good faith and fair dealing.

Steps

Understanding When to Sue an Insurance Company

1. Understand automobile insurance. An insurance policy is a contract between the insured and the insurance company. The insured pays premiums and the insurance company, in exchange, agrees to cover the cost of certain claims. Typically, an insurance policy will cover two types of claims: first-party claims and third-party claims.
   • A “first-party claim” is paid directly to the insured. For example, some insurance policies will cover damage to the insured’s car or even an injury suffered by an insured. If you damage your car, you can make a claim for the insurance company to pay to fix it. Your insurer may also cover personal injuries you have suffered. Many driver’s make sure to get coverage for “first-party” claims because they fear that other drivers will not have insurance. In fact, in a “no fault” state, you will have no choice but to bring a claim against your insurer after an accident.
   • A “third-party claim” involves injury or harm to a third party. For example, if you get in a car accident and a jury finds that you were at fault, then your insurance company should pay some or all of the damages you owe to the other driver, up to your coverage limit.
2. Participate in a personal injury lawsuit. When drivers get into an accident, they often sue each other. They do not sue each other’s insurance companies. Instead, the insurance company will “indemnify” its insured, i.e., it will pay some or all of the damages owed, provided that the claim falls within the insurance policy agreement. If the insurance company refuses to pay a valid claim, then its insured may sue it for bad faith.
   • If you win at trial but the other driver’s company refuses to pay, you generally cannot sue the insurance company for “bad faith.” This is because the duty of good faith is owed to the insured, not to injured third parties. If you are injured and the other party’s insurer refuses to pay a claim in bad faith, then you can see if the state allows the other party to “assign” its bad faith lawsuit to you.
3. Understand an insurer’s duties. An insurance policy carries with it an implied covenant of “good faith and fair dealing” on the part of the insurer. This means that it must discharge all of its duties “reasonably.” An unreasonable delay or refusal to pay a valid claim is an example of bad faith.
   • Other duties include a duty to reasonably investigate a claim and a duty to defend against a claim.
4. Identify “bad faith” conduct. Bad faith can take many forms. To see if you have a claim for bad faith against your insurer, then you need to look for the following:
   • Deceptive practices or deliberate misrepresentations to avoid paying claims.
   • Deliberate misrepresentation of record or policy language in the hopes of avoiding coverage.
   • Unreasonable delay in resolving claims or a failure to investigate.
   • Unreasonable litigation conduct.
   • Arbitrary or unreasonable demands for proof of loss.
   • Coercive or abusive tactics used to settle a claim.
   • Compelling an insured to contribute to settlement.
   • Failing to investigate the claim thoroughly according to its own procedures.
   • Failing to maintain adequate investigative procedures.
   • Failing to disclose policy limits and explain applicable policy provisions or exclusions.
5. Hire an attorney. To understand if you can bring a suit for “bad faith,” then you should speak to an experienced attorney. An experienced lawyer will be able to identify any conduct by the insurance companies that might qualify as “bad faith.” Furthermore, an attorney will know whether your state allows “bad faith” claims to be brought in your particular situation.
   • To find an experienced attorney, you should visit your state bar association’s website, which should run a referral service. You can search for attorneys by location and specialty.
   • You should look for an attorney who handles car accidents. If your state’s referral system does not let you filter results according to that specialty, then look for someone who practices personal injury law.
   • When you find an attorney, you should call and set up a consultation. At the consultation, you should ask the lawyer if they have experience in these kinds of lawsuits. Not all personal injury attorneys will have experience suing insurance companies for bad faith.

Building a Case Against Your Insurer

1. Get a copy of the insurance policy. The insurance policy is the basis of your lawsuit. An insurance company only has to cover claims it has agreed to cover in the policy. Accordingly, you need to be familiar with your policy.
   • Share a copy with your attorney, also. Your lawyer needs to know the full scope of your coverage. Even if the insurer acted reasonably in denying your claim, you may still have different legal causes of action against the insurer.
2. Ask the insurer for the reasons a claim was denied. You should get your insurer on record as to why it is not honoring a claim. You should ask specifically for your insurer to put its reasons for denial in writing.
   • Your letter may force the insurance company to alter course and stop denying your claim. Even if you are unsuccessful in that respect, you are also creating a paper trail of evidence that the insurance company has engaged in bad faith.
3. Keep all communications with your insurance company. Since your insurance company will be the defendant to your lawsuit, you should keep copies off all communications with the insurance company. Preserve all of the following:
   • Letters
   • Emails
   • Voice messages
   • Notes from any face-to-face conversations or unrecorded telephone calls
4. Preserve all evidence related to the claim. If you are suing for bad faith, then you will want to preserve all evidence that relates to your lawsuit. This evidence can take many forms:
   • If your insurance company refused to indemnify or defend you in an automobile accident suit, then you will want information related to money you spent on defending yourself in the personal injury lawsuit. You should also preserve information such as any written judgment entered against you by a court, as this will show how much you owe a third party.
   • If your insurance company denied a first-party claim from you (e.g. for damage to your car), then you will want evidence showing the damage or injury. This can take the form of medical bills, physical therapist bills, as well as bills from an auto repair shop.
5. Report a violation, if necessary. State law may require that you notify the insurer and your state’s Department of Insurance in writing of any violation. In Florida, for example, you must notify the insurer and the Florida Department of Insurance. The insurer then has 60 days to cure.
   • To find your state’s Insurance Department, visit this map and select your state.
6. Participate in settlement negotiations. Your attorney may contact your insurance company and seek to participate in settlement negotiations. Negotiations may also happen after you file a lawsuit. In any event, you should take settlement negotiations seriously. A successful settlement will allow you to avoid going to trial.
   • Your lawyer owes you an ethical duty to notify you of settlement offers. Even if your lawyer does not want to engage in settlement, he or she must still tell you. Ultimately, whether to settle is your decision, not your lawyer’s.

Bringing a Suit Against an Insurer

1. File a complaint. If your state allows a lawsuit against an insurer for bad faith, then your attorney will start the lawsuit by filing a complaint in court. The complaint will list the facts as you allege them and ask for requested relief. In this type of lawsuit, you can be compensated not only for your injuries but sometimes an additional amount in punitive damages.
   • To get punitive damages, you typically have to allege that the insurance company’s conduct was malicious, oppressive, or fraudulent.
   • You shouldn’t wait to bring a suit. States have strict “statute of limitations.” These statutes require that you bring a lawsuit within a certain amount of time. In Nevada, you will have four years from the adverse action by the insurer to file a suit. However, in Indiana, the statute of limitations is two years and could be shortened by the policy itself.
2. Sit for a deposition. One way for an insurance company to defend itself is to claim that you are to blame for its failure to investigate or settle a claim. For example, the insurance company might claim you didn’t report an accident properly, didn’t give the insurance company requested documents, or breached your contract in other ways. Accordingly, you should review your communications and paperwork to make sure that you followed the insurance company’s policies.
   • You should prepare for your deposition with your attorney. In a deposition, you will answer questions under oath in front of a court reporter. You can prepare by doing a “dry run” where your lawyer pretends to be the insurance company’s lawyer.
   • Preparing for a deposition is also good preparation for trial, where you will also be answering a lawyer’s questions. Focus on listening closely to the question and only answer the question asked. Don’t volunteer information.
   • If you don’t know the answer to a question, then say, “I don’t know.” Never guess.
3. Pick a jury. Before the trial can begin, you must pick a jury in a process called “voir dire.” During this process, the attorneys will ask potential jurors questions in order to uncover their biases. If a juror admits to being biased against your case, then your attorney can strike the juror “for cause.”
   • Your attorney will also have a certain number of peremptory challenges. With these challenges, your lawyer does not have to give a reason for why the juror has been struck from the panel.
   • You may have the option of a bench trial. As the plaintiff in this type of lawsuit, you should take a jury trial. Juries have a tendency to award big verdicts to plaintiffs when they sue insurance companies. In many states, you are able to sue for “punitive” damages and can therefore collect much more from the insurer than the amount you owe to the injured driver.
4. Present evidence. As the party going first, you will present evidence. You will call witnesses to testify and to admit documents into evidence. Your lawyer should try to start and end the case strong, by sandwiching weaker witnesses in the middle. Often, your attorney will try to develop a bad faith case along common themes, such as showing a “pattern or practice” of bad faith inside the insurance company. Your attorney may call the following witnesses:
   • you (the insured)
   • the claims adjuster
   • an expert who can testify to industry standards and who can explain how your insurance company fell short of those standards
5. Await the verdict. After the evidence has been presented, the judge will read the jury instructions to the jury before they withdraw for deliberations. In state court, verdicts do not necessarily have to be unanimous.
   • If you are unhappy with the result, then speak to your lawyer about a possible appeal. Appeals can be costly, and the cost of the litigation may weigh on whether or not you want to continue to pursue the bad faith claim.

Tips

• If you win a lawsuit against a party who has been abandoned by his insurer in bad faith, then in some states you may be able to then bring a suit for bad faith against the insurer. In these states, the insured “assigns” the suit to you. In other words, you step into the insured’s shoes and then sue their insurance company on their policy.

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Sources and Citations

See also

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• Handle Your Auto Accident Claim
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• Handle Denied Car Accident Claims
• Expense Lost Time from Insurance Claim
• Make a Road Traffic Accident Claim
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