Auto Insurance Malpractice: Understanding The Risks And Consequences

Auto insurance malpractice can occur when an insurance company fails to act in good faith and deal fairly with a claimant. This can include failing to pay or delaying payment on a legitimate claim, providing insufficient compensation, or coercing a claimant to accept a smaller settlement than they are entitled to. In some cases, insurance companies may also be guilty of malpractice if they fail to abide by the laws of the state where the claim is made or neglect to uphold the obligations stated in the insurance policy. When an insurance company engages in malpractice, claimants may have the legal option to sue the company directly or, in some states, bring a third-party insurance claim or lawsuit.

Denying valid claims

Auto insurance companies can deny claims for a variety of reasons, some of which may be considered malpractice. Here are some common reasons for denying a claim that could potentially constitute malpractice:

Lapsed Insurance Policy

If a policyholder fails to pay their insurance premium on time, their coverage may lapse. This means that if they get into an accident, their insurance company will deny their claim because they do not have an active policy. It is important to pay premiums on time to maintain continuous coverage.

Insufficient Coverage

Insurance policies have different types of coverage, and sometimes policyholders do not have the right type of coverage for their specific situation. For example, if a person only has liability coverage and their car is stolen, their insurance company will not cover the loss because theft is not included in liability coverage. It is important to understand the different types of coverage offered and choose the ones that best fit an individual's needs.

Failure to Notify Insurer in Time

Most insurance policies have specific time frames within which an accident must be reported. If a policyholder fails to notify the insurance company within the specified time, the company may deny their claim. It is crucial to report accidents as soon as possible to avoid this issue.

Policy Exclusions

Insurance policies often have exclusions for certain events or circumstances. For example, some policies may exclude "acts of God" or natural events. If an accident occurs due to a natural event like a hailstorm, the insurance company may deny the claim, arguing that the accident was caused by the natural event and not the negligence of another driver.

Bad Faith Practices

Bad faith practices by an insurance company refer to dishonest or unfair dealings. This could include unreasonably delaying the handling of a claim, denying a claim without a valid reason, or failing to conduct a thorough investigation. If an insurance company engages in bad faith practices, the policyholder may have legal recourse to challenge the denial of their claim.

Misrepresentation of Facts

In some cases, insurance companies may deny a claim due to misrepresentation of facts by the policyholder. For example, if a policyholder provides false information when purchasing coverage or filing a claim, the insurance company may deny the claim. It is important for policyholders to be truthful and accurate when reporting information to their insurance company.

When an insurance company denies a valid claim, it can cause significant financial and emotional distress to the policyholder. In such cases, it is important to understand your rights and explore your options, such as filing an appeal or seeking legal assistance to challenge the denial.

Refusing to pay a claim

When an insurance company refuses to pay a claim, it is usually because they are trying to protect their profits. They will do anything to keep their money in investment accounts to continue accruing interest on your money. They will also try to delay your claim so that they can accrue interest on your money.

What to do when an insurance company refuses to pay a claim

If an insurance company refuses to pay your claim, you should fight back. Here are some steps you can take:

• Avoid emotional responses: Anger is a common response when an insurance company denies a claim, but it rarely helps reverse the decision. Claims personnel are used to anger and threats of legal action. Instead, channel your emotions into action and make the insurance company listen.
• Get legal help: An experienced accident injury lawyer can help you fight back and get the insurance company's attention. They can also help you understand any complex legal phrases in the denial letter.
• Understand why your claim was denied: You need to know why the insurance company refused to pay your claim in the first place. Request a written explanation if you did not receive one. Consult with a personal injury attorney to help you understand the letter.
• Present new information: Insurance companies deny claims for a variety of reasons, but they must have evidence and coverage information to support their decision. You can force them to reconsider their rationale by providing new facts or additional evidence.
• File an Uninsured Motorist claim: If the other driver's insurance company denies your claim based on a coverage issue, you may have a minimal chance of recovering damages. In this case, you can file an Uninsured Motorist claim with your own insurance company.
• Negotiate a settlement: You or your attorney can negotiate a settlement with the insurance company, especially if Florida's comparative fault statutes apply.
• File a lawsuit: If the insurance company continues to refuse to pay your claim, you may need to file a lawsuit. This will get their attention and force them to take your claim seriously.
• Seek a fair settlement: Don't be afraid to walk away from a low settlement offer. Insurance companies often make low offers hoping that you will accept them. By threatening to take something away (profits), you can motivate them to pay the full value of your claim.
• Hire the right lawyer: Hiring an aggressive, board-certified civil trial lawyer who is willing to file a lawsuit and go to trial will put pressure on the insurance company to take your claim seriously.

Remember that insurance companies are motivated by profit and will do anything to protect it. Don't be afraid to fight back and get the compensation you deserve.

Failing to settle

Disputes over liability often arise when there is insufficient evidence to prove the fault of another party. Insurance companies may feel more confident about winning the case in court and deny a settlement. However, the discovery process allows claimants to request additional information from the at-fault driver, such as phone records, which can help prove their claim.

Another issue is pre-existing injuries. Insurance companies may deny compensation for injuries that the claimant had prior to the accident. However, if the claimant can prove that their old injuries were aggravated or new injuries were sustained in the crash, they may still be able to recover compensation.

In some cases, insurance companies may make lowball settlement offers, knowing that the claimant is unlikely to accept and will demand more. This strategy puts pressure on the claimant as their medical bills pile up, and they may be forced to accept the initial offer or take the case to court.

Overall, failing to settle in auto insurance claims can be attributed to disputes over liability, injuries, and damages, as well as strategic moves by insurance companies to minimise payouts. Claimants may need to consider litigation or seek legal assistance to resolve these issues and obtain fair compensation.

Acting in bad faith

When an insurance company acts in bad faith, it violates the principle of "good faith," which requires both parties to an insurance contract to act honestly and fulfil their obligations. While simple mistakes or differences of opinion between the policyholder and the adjuster do not constitute bad faith, deliberate actions to deceive or harm the policyholder do.

• Denying a valid claim without justification: If an insurance company denies a claim that should be covered without providing a valid reason, it may be acting in bad faith.
• Unreasonably low settlement offers: Insurance companies often make settlement offers that are significantly below what the policyholder is entitled to, which is considered bad faith.
• Refusal to investigate a claim: Insurance companies have a duty to conduct prompt and complete investigations into valid claims. Failing to do so may indicate bad faith.
• Unnecessary delays: Insurance companies sometimes intentionally delay the claims process, knowing that it may push policyholders to accept lower settlements or give up altogether.
• Threatening policyholders: Making threatening statements or engaging in intimidating behaviour towards a policyholder is a form of bad faith.
• Misrepresenting the policy: Insurance companies act in bad faith when they misrepresent the terms, exclusions, or limitations of a policy to avoid paying claims.
• Putting profits over policyholders: When insurance companies prioritise their profits over fulfilling their obligations to policyholders, they are acting in bad faith.

If you suspect that your auto insurance company is acting in bad faith, it is important to document your interactions, gather evidence, and seek legal advice. Consulting a lawyer experienced in bad faith insurance claims can help you understand your rights and options for recourse.

Unfairly handling claims

Unfair claims practices can occur when an insurance company tries to delay, avoid, or reduce the size of a claim that is due to be paid out to the insured. This is illegal in many jurisdictions.

The National Association of Insurance Commissioners (NAIC) has created a model of unfair claims practice legislation that mandates claims be handled fairly and that there be clear communication between the insurer and the insured. Most states have enacted a version of this model law, called the Unfair Claims Settlement Practices Act (UCSPA). The UCSPA is enforced by individual states, and specifics of the law vary from state to state.

Failing to Provide a Reason for a Denied Claim

If an auto insurance company denies a claim, it should provide a reason for the denial. If the denial is unjustifiable, it can be a sign of an unfair claims practice.

Attempting to Settle for Less than What is Reasonably Expected

Insurance companies may offer a lower settlement than is reasonable for the circumstances. An insurance company has a duty to negotiate in good faith, and if it doesn't, it can be sued and may end up paying penalties that exceed policy limits.

Conducting an Inadequate Investigation

An insurance company has a duty to reasonably and promptly investigate claims brought to them by an insured. If the company does not conduct a thorough investigation, which leads to a delay or poor outcome, this may be grounds for a lawsuit.

Delaying a Decision or Payment

The investigation, negotiation, and settlement of a claim must occur within a reasonable amount of time. Delayed decisions may affect the choices available to the insured following an accident, especially if the accident involves catastrophic injury. If an insurance company delays investigating or settling a claim, this may constitute an unfair claims practice.

Failing to Pay for a Valid Claim

After submitting a valid claim, an insurance company will require evidence to help with the claim review process. If a claim is clearly covered within the policy limits and the insurance company refuses to pay, the company may be liable for unfair claims practices.

Refusing to Provide Documentation

Insurance companies should provide adequate updates about a claim and respond to reasonable requests for documentation. If the company does not comply with these requests, it may be grounds for a lawsuit.

Misrepresenting the Language of Policies and Records

Misrepresentations of the law or policy language by an adjuster may indicate that an insurance company is not acting justly. Insurance companies have a duty to act in good faith in adjusting claims and cannot make false statements about the law or the coverage available to the insured.

Frequently asked questions