If you believe your insurance company has given you false information when wrongly denying your claim or preventing you from filing your claim, you may have the right to sue.
How can you sue an insurance company?
There are two main ways you can sue an insurance company for blocking your claim.
Breach of Contract
Many times, suing the insurance company is about breach of contract. Your policy is a contract that says your insurance claims will be paid if you pay on time and follow the claims procedure.
While an insurance company has the right to only pay for claims that your policy covers, it doesn’t have the right to deny properly filed claims that are covered under your policy.
If an insurance company denies a claim by telling you it’s not covered when it is or that it’s worth less than it is, you can sue to enforce your insurance policy.
For example, a car insurance company might tell you that your car is only worth $5,000 when the blue book says it’s worth $10,000 and every similar car for sale is priced at around $10,000. If the insurance company is misrepresenting your car’s value and not using some other book value that’s listed in your policy, you have the right to sue.
Insurance Bad Faith Laws
Another possible way to sue your insurance company is under bad faith laws. Bad faith laws are designed to protect consumers about insurance companies that intentionally lie about what’s covered by their policies or what your claim is worth.
Depending on your state’s insurance law, proving bad faith can entitle you to additional damages beyond what your claim was originally worth.
For example, let’s say your car insurance policy says your insurance company has to replace your car at the value dealers are selling it for within 50 miles of your house. When you file your claim, they’ll only pay you the trade-in value.
When you contact them again and show them the price at a nearby dealer, they again say they only have to pay the trade-in value. They refuse to discuss your policy any further.
In that situation, there’s a good chance that you have a bad faith claim against your insurance company.
How do you prove misrepresentation by an insurance company?
The good news is that many claims don’t end up with needing to prove misrepresentation. When insurance companies deny claims, you have the right to appeal.
They’ll often increase their offer when you show documentation supporting a higher amount. If they don’t change their offer at first, many will once you get a lawyer involved.
If an insurance provider keeps fighting you, the most important thing to do is get everything in writing. Ask for a written claim denial. They’re usually required by law to give it.
You’ll also typically want to correspond by letter or email instead of talking on the phone. If you’re thinking about recording a phone call, make sure it’s legal to do so in your state without having the other party’s consent.
Many insurance companies tell their claims representatives not to talk to you if you say you’re recording. If you don’t ask their permission when required to do so by law, you may be committing a crime.
You may also want to get a lawyer involved. Insurance claim attorneys don’t always charge you upfront. In some states, your insurance company may have to pay your legal costs if they lose a bad faith claim. In other cases, you may only have to pay a percentage of what you win.
Once you have a lawyer and begin the legal process, you may be entitled to engage in discovery. Discovery is a process that lets you get information about how the insurance company handled similar claims.
Seeing a pattern where the insurance company denied multiple claims without a good faith reason can support bad faith claims.
What isn’t misrepresentation?
It’s not misrepresentation when an insurance company has a good faith reason for denying your claim or making a low settlement offer.
For example, it’s common for health insurance companies to deny claims when doctors don’t provide enough information. It might be up to your doctor to provide more documentation to the health insurance company.
Another common situation is a home insurance claim where the insurance company bases your property damage payout on historical repair prices but you’re getting much higher quotes from every contractor. Depending on how your policy handles replacement costs, your insurance company may need to work with you to find a contractor who will work at their price or to accept your quotes from the contractors you found.
However, even if your denied claim isn’t a case of misrepresentation, you’re still entitled to the full compensation provided by your insurance policy. You do not have to accept the initial offer and can appeal to the insurance company or file a lawsuit if needed.
If you believe the insurance company misrepresented your coverage or your claim’s value, you may have the right to sue. You’ll generally be looking to sue to enforce your insurance policy or to file a bad faith claim.
When you look for a lawyer, you may want to look for an insurance lawyer or a lawyer who handles the specific type of claim you had denied.