According to a survey conducted by the National Association of Insurance Commissioners (NAIC) in 2008, the top five reasons why automobile insurance consumers filed complaints against their insurers include delay in getting payments, denials of claims, dissatisfaction with settlement offers, and issues relating to insurance rating and policy cancellation. If you are unhappy with your auto insurance company, you can sue the company in the small claim courts; this doesn’t even require legal representation. However, in most cases policyholders do not know whether their car insurer is breaking the law. This article will outline various actions by a car insurer which may be grounds for a lawsuit.

When to Sue a Car Insurer for Breaking the Law

Each state has different laws to protect policyholders from fraudulent insurance companies. In general, you can file a lawsuit on grounds of bad faith and/or breach of contract. Here are the top five tips on how to determine whether an auto insurance company is breaking the law.

1. Not getting timely response to insurance claims – According to United States law, a policyholder should get timely responses from their auto insurance company after filing a claim; in some states they have so many days, such as New York, which requires some kind of response within 45 days. However, if your insurer does not respond within a few weeks, you should call the company to verify your claim is being processed. It is always a good idea to establish proof of each of your activities. Therefore, be diligent in your record keeping and document everything. If the insurance company doesn’t offer satisfaction, then you should send a letter. If you’re not satisfied or they haven’t responded after sending a written request, you can file a lawsuit against the company on grounds of bad faith. If proven in court, you may be awarded punitive damages, which could be more than the value of your claim.

2. Dissatisfaction with settlement offers – You can also file a lawsuit against an auto insurance company for unreasonably low settlement offers. For example, if a policyholder claims $10,000 after an accident and if the insurer offers him only $2,000, it may be considered grounds for bad faith. While many providers of inexpensive auto insurance are good about paying fairly, there’s no denying that some are better than others when it comes to settlement offers.

3. Improper investigation – While an insurance company has the right to research all insurance claims to decide whether they are valid and reasonable, the method of investigation should be legal. If you can prove that the auto insurer used improper and illegal ways of investigation to avoid paying your claims, you can definitely sue the insurer on grounds of bad faith or breaching of contract.

4. Refusal to settle for insurance claims – If the insurance company refuses to settle an insurance claim, it may be considered a breach of contract. However, before taking legal steps against the insurer, you should make sure that your claim is valid and within the policy limits. Refusal to settle a valid insurance claim is also considered grounds for bad faith.

5. Denial of insurance claims – Unless an insurance company has valid reasons, they simply cannot deny paying your insurance claim. However, if the insurer denies payment without adequate reason, you can file a bad faith lawsuit against the company.

The insurance company you’re looking to sue might not be your insurance provider. For example, you may have been injured by someone else and their insurance company may be liable to pay your claim. The above steps should be taken with them as well.

Keep these tips in mind to ensure that you get what is rightfully yours from the auto insurer when filing a claim. No matter how much you spend on auto insurance, it doesn’t mean that you need to forego your claims.

Aliya Martin is a financial consultant with wide experience in the insurance domain. As a writer and blogger, she loves to provide information and opinions on various types of insurance and these days, she is working on auto insurance discounters.

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