Legally reviewed by:
Daniel Smith September 12, 2024
Yes, you can sue your insurance company if you are not responsible for an accident. Fault in a car accident is not a determiner of whether you can commence legal action against an insurer. However, your claim should be stronger when you are not at fault and have valid coverage.
Being in a car accident could be a very stressful and traumatic experience, especially when you are disabled in some way after the accident.
Handicaps could take different forms, such as injuries you have to spend money to treat, losing your earning capacity for weeks or months because you are recovering from those injuries, and damages to property that you need to repair or replace.
This is where insurance companies usually come in. One of the primary appeals of any insurance policy is that by purchasing it, the insurance company becomes responsible for mitigating any handicaps in the form of financial liability you incur in an accident.
Unfortunately, though, insurance companies do not always improve things, even though they should. Sometimes, they can even make things worse by making a fairly simple process overcomplicated and more stressful.
An insurance company might do that for two primary reasons. First, they exist to make a profit, and they primarily profit by getting more money in premiums than they spend on payouts, so they are always wary about payouts.
The second reason is that people often engage in insurance fraud—claiming more damages than they have suffered to get the insurance company to pay them more than they deserve or faking an accident to get a payout. Therefore, insurance companies have to scrutinize every claim.
However, the desire to make a profit and the need to scrutinize every claim could frustrate valid claims. And when it does, you may have to force the insurance company to honor their contractual obligation to you in court.
In this article, we look at all you need to know about insurance claims, when you should sue, and the lawsuit process, among other things.
Understanding Insurance Claims and Denials
So, you've been in an accident and must make an insurance claim. Your claim will significantly affect whether you get your settlement or claim denied, so it is essential to understand what a claim is and the process from claim to settlement or denial.
Making a claim
A claim is a formal request for settlement from your insurer. Once you've been in an accident you believe is covered under your insurance policy, nothing stops you from making a claim.
However, it might not be best practice to immediately focus on how to claim with your insurer. There are a few things you should do first:
- Collect the other driver’s insurance information.
- Get physical evidence (pictures and videos) of the crash. Take photographs of the damage to your car, the damage to the other vehicle, and any injuries you may have suffered.
- If any party on the scene has suffered injuries, seek treatment by calling 911 to the scene.
- If there are no injuries but you believe there has been significant damage to any property, call the police.
- Inform your insurance company that you have been involved in an accident and that you may claim your coverage.
- Hire a personal injury lawyer to help determine if it will be best to claim with your insurer or the other driver's insurer, depending on your available coverage and the state's insurance, fault, and negligence laws.
Once it has been determined that you should claim with your insurer, inform your insurer that you intend to make a claim for the accident you told them about earlier.
Also, find out how you should go about making your claim. Some insurance companies will mail some forms to you. Others will ask you to make a claim online.
To make a valid insurance claim, you will be requested to provide information like your policy number, details about the accident, and any evidence you have. The attached proof should include pictures and videos from the scene, witness statements, police reports when available, and expense reports.
Consulting with a lawyer before submitting your claim will be helpful since they can help you to properly describe the incident and select the relevant evidence to attach.
Insurance investigation
After receiving your claim, the insurance company will appoint a claims adjuster to investigate it. The claims adjuster will review your evidence and try to confirm it.
They might visit the accident site, obtain video footage of the accident where it is available, and even schedule an appointment to examine the damages you've claimed.
During the investigation, insurance companies will likely monitor your social media pages to look for evidence suggesting that you are not as injured as you’ve claimed.
Claim resolution
After investigating, your insurer will attempt to resolve your claim by either accepting to pay the total claim amount or countering with an offer they feel is more appropriate. A counteroffer will be less than the amount stated in your claim, and it may be a ploy from the insurance company to convince you to accept less than you deserve.
A counteroffer may also be because you have claimed for an amount above your policy limits or your policy does not cover that incident.
Claim Denials
Your insurer may also deny your claim outrightly. A claim denial could be for several reasons, such as your policy not covering the incident you claim for, the damages you claim were not caused by the accident, or if they believe the claim is fraudulent.
A claim denial could also be because you were driving illegally, the evidence you provided does not fully support your claim, or you’ve missed insurance payments.
When to Consider Suing Your Insurance Company
What are the things that indicate that it is time to start thinking about a lawsuit against your insurer?
Unnecessary Delays
Most states have laws that require insurance companies to ensure reasonable, prompt communication with their customers when handling claims. Suppose your insurance company unreasonably exceeds the state-specified time limit for a specific action. In that case, it may indicate bad faith or grounds for a lawsuit that your settlement has accrued interest, whereas state law provides that delays should result in interest on settlements.
California’s Cal. Code Regs. Tit. 10, § 2695.5(e) provides that an insurance company has 15 days to provide you with the forms necessary to file a claim when you give notice of your intention to file a claim or acknowledge receipt of your claim when you make one.
Cal. Code Regs. Tit. 10, § 2695.7(b) also provides that insurers must accept or deny a claim within 40 days of receiving proof of that claim, and if more time is required to investigate the claim, a continuing notice stating the need for additional time and if there is any need for more information from the claimant, must be provided to the claimant every 30 days until a decision is reached.
In Michigan, Mich. Comp. Laws § 500.2006 states that an insurer must inform a claimant what proof will be required to support that claim within 30 days of receiving it. It also says that a claim will be considered timely if paid within 60 days after the insurer receives the relevant proof of loss. Here, settlements not paid promptly will accrue a 12% annual interest.
Failure to perform their obligation to investigate
Your insurance company is legally obligated to investigate your claim and the accident you were involved in. This obligation is spelled out in Arizona in Ariz. Rev. Stat. § 20-461, and Illinois has a similar provision in 215 Ill. Comp. Stat. § 5/154.6.
If you have genuine cause to believe that your insurance company is not properly investigating your claim or considering all the information they have to decide, that may be grounds for a lawsuit against them. But note that if you intend to sue on this ground, you must prove it, so it is best to discuss your suspicions with an attorney first.
Denying your claim without reason
If an insurer is going to deny your claim, they must inform you in writing and specify why they are denying it so you can appeal the denial. New York’s N.Y.I.S.C. § 3420(d)(2) requires that written notices be sent to the insured when an insurance company denies a claim, and in Bahnuk v. Countryway Ins. Co., 2021 N.Y. Slip Op. 32052 (N.Y. Sup. Ct. 2021), the court emphasized that an insured has the right to know the reason for a disclaimer.
Unfair settlement
Insurers are generally required to be fair when offering settlements. Texas Insurance Code § 541.060 contains this requirement by stating that failing to effectuate a prompt, fair, and equitable settlement in good faith will constitute an unfair settlement practice.
Ultimately, if your insurer partly denies your claim, offers a settlement that you believe to be unfair, and refuses to improve their offer after negotiations, you should consider suing them.
Through a lawsuit, you can convince the court to compel your insurance company to offer you a fair and improved settlement or simply seek better compensation by claiming damages against your insurer in court.
Types of Lawsuits Against Insurance Companies
The most common types of lawsuits against insurance companies are:
Bad faith
Most legal action against insurance companies falls under bad faith lawsuits because bad faith is very encompassing. It originates from the legal duty an insurance company owes its insured to deal fairly with them. When an insurer goes against that duty, they may be guilty of acting in bad faith.
The requirements for a bad faith lawsuit may vary from state to state. In Rancosky v. Washington Nat’ l Ins. Co., 642 Pa. 153 (2017), the Pennsylvanian Supreme Court established that a plaintiff must prove that no reasonable basis existed for the denial of their benefits and that the insurer knew or recklessly ignored its lack of reasonable basis in denying the claim to establish insurance bad faith.
States with an Unfair Claims Practice Act will also spell out grounds on which an insurer may be considered to act in bad faith.
Fraud
If you discover that your insurance company collected payments from you when they did not intend to pay claims or have the ability to pay claims, you can sue them for fraud. According to 18 U.S.C. § 1033, insurance company fraud is a federal crime when its activities affect interstate commerce, and your state likely has a fraud bureau to investigate insurance company fraud.
Remember that to claim fraud against an insurance company, you must show that it was intentional and went beyond misrepresentation. Actions for misrepresentation could fall under bad faith.
Breach of contract
Your policy is a contract with the insurance company. If they fail to honor their obligations under your policy, you could sue for breach of contract.
Steps to Take Before Suing
Before instituting legal action, you must do the following:
Gather evidence
For any legal action, you must be able to prove whatever you claim. This means you must have sufficient and reasonable evidence to support your lawsuit against your insurer.
For example, if you are suing because they have offered an unreasonable settlement, you must have evidence that shows you are entitled to more. If they deny your claim because you have missed payments, and you want to dispute that in court, you must be able to show that you have not missed payments.
Consult an attorney
Lawsuits against your insurer may get very complex and involve technical issues. They may also require further investigation into the actions of your insurer. This is why you must consult and hire a lawyer before filing your lawsuit.
Negotiate
Most state laws and insurance policies require negotiation through mediation or arbitration before legal action is pursued. And even when it is not required, your insurer will likely offer you the option to negotiate when you notify them of your intention to commence legal action. So, it is essential to satisfy this requirement.
When you negotiate, it is essential to do so genuinely and attempt to find common ground.
The Legal Process of Suing an Insurance Company
Even though you may not be directly involved in the entire process of a lawsuit, you should still be aware of it:
- First, the insurance company will be notified of your lawsuit.
- Next, the parties (you and the insurance company) will go into discovery, where they exchange the evidence they intend to use in the trial.
- There may be a deposition where you and any other relevant witnesses will be interviewed by the opposing attorney under oath. Your lawyer may also depose some individuals on the insurance company’s side.
- The case will proceed to trial.
Factors Influencing the Success of Your Lawsuit
The following will likely determine whether your lawsuit will be successful:
- Your compliance with traffic laws in the aftermath of the accident.
- Your state’s negligence laws. If you were not primarily responsible for an accident but still share some fault, it will impact the amount you receive in compensation.
- The relevance and admissibility of the evidence you have accrued. This means your evidence must be clearly and directly related to your claim while being something that may be admissible in court.
- The skill and experience of your attorney will also contribute to the success of your lawsuit.
Potential Outcomes and Compensation
If the court finds in your favor, the insurance company will be asked to pay what they should have paid initially (with interest in some cases) or the damages you claim against them in court. Most of the time, the court will also require them to cover your legal fees.
If you lose, however, the opposite may be the case.
Contact The Accident Helpers
As long as you have a good lawyer, you do not have to fear suing your insurance company because it is your right. Once you suspect your insurance company is not cooperative, you should immediately talk to a lawyer who can advise you on the best next steps and what evidence you should try to gather.
Since most insurance companies also try to avoid lawsuits and immediately offer negotiation at the threat of a lawsuit, your lawyer can also help ensure that you get a proper and fair settlement through negotiation.
If you are looking for an experienced and skilled lawyer to help with an insurance lawsuit, we can help. At The Accident Helpers, we help you get the best lawyers around you for free! Are you interested in seeing how? Contact us today.
