Auto Insurance Claims: When To Take Legal Action

Auto insurance claims can take anywhere from a few days to several months to settle, depending on the circumstances of the accident and other factors. In most cases, insurance companies strive to resolve claims within 30 days, but this can vary depending on the state and the complexity of the claim. Claims may proceed to litigation when a dispute arises between the insured and their insurance company or between the injured party and the insurance company, often due to low-ball settlement offers or denial of liability by the insurance company. Litigation can be a costly process for insurance companies, so they may be driven to settle to avoid it.

The insured party refuses to accept a low-ball settlement

When an insurance company makes a lowball settlement offer, it is usually testing the claimant. As the claimant is unrepresented, the insurance adjuster assumes they are an easy target. The adjuster will make a low offer, hoping the claimant will be pressured into accepting it.

If the insured party refuses to accept a lowball settlement, they can take the following steps:

• Stay calm when talking to the insurance adjuster. It can be tempting to lose your temper, but this will not help your case. If you feel unable to control your emotions, it may be best to have a lawyer do the talking for you.
• Gather proof of your damages. With evidence, it is much harder for insurance adjusters to downplay your injuries. This can include the police report for the accident, copies of your medical bills, medical scans, pictures and video footage of the accident scene, and documentation of lost wages from your employer.
• Ask the adjuster how they calculated your offer. Many insurance adjusters will lowball you on non-economic damages, as these do not have a set dollar amount. Ask the adjuster which multiplier they used for non-economic damages (this should be between 1.5 and 5).
• Continue with your medical treatment plan. If you do not, the insurance company might say you are fully recovered and reduce your settlement. If you are struggling to pay your medical bills, the hospital or doctor may be able to work out a payment plan with you.
• Consult a lawyer. Lawyers are skilled negotiators and know how to fight for a fair settlement. If negotiations fail, they can take the insurance company to court.

The insurance company denies liability

When an insurance company denies liability, it is important to understand the reason behind the denial and explore the available options to appeal the decision. Here are some steps to consider when dealing with a denied auto insurance claim:

Understanding the Denial

When an insurance company denies liability, they are typically asserting that the claim falls outside the scope of the policy's coverage. Common reasons for denial include lapsed insurance policies, lack of necessary coverage, policy limits, and breaking the law. For example, if a driver allows their insurance policy to lapse by failing to pay the premium on time, the insurance company may deny any claims made during that period. Similarly, if the damages exceed the policy limits, the insurance company may deny coverage for the excess amount. It is important to carefully review the insurance policy and understand the specific coverages, exclusions, and limitations to assess the validity of the denial.

Gathering Evidence and Information

If you disagree with the insurance company's decision, it is crucial to gather evidence and supporting documentation to strengthen your appeal. This includes police reports, eyewitness statements, medical reports, photographs, and other relevant information pertaining to the accident. Having comprehensive evidence can help substantiate your claim and challenge the insurance company's denial.

Drafting an Appeal Letter

The next step is to draft a well-constructed appeal letter, clearly outlining your disagreement with the insurance company's decision. In the letter, explain why you believe their decision is incorrect and provide specific details and references to the evidence you have gathered. It is important to be thorough and provide as much relevant information as possible to support your appeal.

Consulting an Attorney

If you feel uncomfortable handling the appeal process on your own or want expert guidance, consider consulting an attorney. An experienced attorney can review your case, assess the validity of the insurance company's denial, and help you navigate the complex legal landscape. They can also draft a demand letter to the insurance company, demanding a response and defence of their claim denial. While hiring an attorney may incur upfront costs, it could be a worthwhile investment to increase your chances of a successful appeal.

Understanding Bad Faith Practices

In some cases, insurance companies may engage in bad faith practices, such as unreasonably delaying your claim, denying a claim without a valid reason, or failing to conduct a thorough investigation. If you suspect the insurance company is acting in bad faith, consult an attorney to discuss the possibility of filing a bad faith claim. Successful bad faith claims can result in additional damages awarded to you, including legal fees and interest on unpaid benefits.

Exploring Alternative Options

If the insurance company upholds their denial, it is important to explore alternative options for compensation. For example, if the denial is due to an uninsured or underinsured motorist, you may need to rely on your own uninsured motorist coverage. Alternatively, if the insurance company is uncooperative or unresponsive, consider contacting your state's insurance department for assistance. Many states have special units set up to handle policyholder issues and dispute resolutions.

The insured party sues their insurance company for acting in bad faith

When an insured party sues their insurance company for acting in bad faith, it is often because the insurance company has failed to meet its legal obligations under the terms of the insurance policy. This can include wrongful claim denial, untimely or incomplete claim processes, untimely payments, inadequate payments, or failure to pay valid claims.

Before taking legal action, it is important to understand the terms of your policy, gather evidence, and attempt dispute resolution through mediation or arbitration. If litigation becomes inevitable, the insured party and the insurance company will hire lawyers and begin the discovery process, which involves exchanging documents and conducting depositions. The insured party will likely have to participate in mediation/settlement discussions and weigh settlement offers.

If the case goes to trial, the insured party will be required to testify in court and may have to spend money on court costs, experts, discovery, and travel. The lawsuit can take several years to resolve, and the outcome is uncertain. However, over 90% of lawsuits end up settling before trial, so a settlement through negotiations and/or mediation is likely.

The insured party fails to notify their insurance company of the accident

Motor insurance policies are contracts between the policyholder and the insurance company, and they are subject to terms and conditions that must be complied with by each party. Most policies require any policyholder involved in an accident to report the circumstances to the insurance company, regardless of whether a claim is being made.

Failing to report an accident can lead to your policy being declared void by your insurers, which could result in you being uninsured in respect of vehicle damage in the event of a later accident. For example, if you are involved in a minor accident and do not report it, and then some months later you are involved in a more serious accident and wish to claim on your policy, your insurers may inform you that, as a result of your non-disclosure of the previous accident, your policy is void and you are not covered for the damage to your car.

In addition, if you are involved in an incident that results in injury or damage to someone else's property, you could be held liable and face legal action. If your insurance policy is invalidated due to your failure to report an incident, you may be responsible for the costs of any damages or injuries resulting from the incident. You may also face legal action due to breaching the terms of your policy, which states you must report all incidents.

Different insurers talk to each other, and there is also a database of claims and reports, so lying is not an option.

The insured party is accused of causing the accident intentionally

Auto insurance claims may proceed to litigation when the insured party is accused of causing the accident intentionally. In such cases, the insurance company may refuse to provide coverage and legal defence for the insured, leaving them personally liable for any damages and legal fees resulting from the accident.

Automobile insurance policies typically provide coverage only for negligent actions, excluding intentional actions. Hence, if the insured is accused of intentionally causing the car accident, the insurer may deny coverage and legal representation. For instance, in the case of drunk driving, some insurance companies argue that it constitutes intentional conduct, and thus, they may refuse to cover any claims arising from a DUI-related accident.

When facing litigation due to alleged intentional actions, the insured party has several options to consider. Firstly, they should carefully review their policy to understand the specific terms and conditions. Secondly, they should promptly notify their insurance company about the accident, as failing to do so within the specified time frame may jeopardise their coverage. Thirdly, if the insurance company refuses to provide legal representation, the insured may need to hire their own attorney to defend them in court.

Additionally, the insured party can take steps to protect their assets in case of a judgement against them. This includes utilising state exemption laws, such as the homestead exemption or entireties ownership, to structure their assets in a way that makes judgement collection difficult for the plaintiff. Furthermore, they can discuss with their insurance carrier whether the damages are within their policy limits and determine which assets are already exempt from collection.

In summary, when the insured party is accused of causing the accident intentionally, it is crucial to understand the insurance policy's limitations, act promptly to preserve coverage, and consider legal representation and asset protection strategies to mitigate potential financial risks.

Frequently asked questions