Denial of Insurance Claims – What Happens When Insurance Companies Act in Bad Faith
By Larry Bodine Publisher, The National Trial Lawyers
A fatal car crash seriously injured Howard Bigler and killed his son Brian in April 2003. The other driver, Donald Cox, veered into the Biglers’ vehicle while adjusting his sun visor. Cox sought coverage and legal representation from his insurer, Personal Service Insurance Company (PSIC), but they refused his claim and a settlement demand for $50,000, which was the policy’s liability limit.
PSIC then refunded Cox’s premium four days later, claiming they had cancelled his policy one month prior to the accident. These actions spurred a lawsuit against PSIC for wrongful denial of coverage benefits in bad faith, resulting in a jury award of $8 million for compensatory damages and $2 million for punitive damages in January 2012. The Ohio District Court of Appeals upheld the award in a recent appeal.
Recognize and Protect Against Insurance Companies Acting in Bad Faith
Had PSIC simply paid out $50,000 to the Biglers’ back in 2003, the company would have avoided a $10 million loss. By playing games and denying a small claim in bad faith, PSIC ended up paying a much greater price. The court in this case sent a strong message to insurance companies about bad faith denial of coverage, but all too often claimants still get the runaround.
Car accidents have many consequences, but no one deserves to be left without the support of their insurance company after a crash. Recognizing insurance company bad faith is the first step protecting your rights as an insured motorist. Insurance companies typically act in bad faith when any of the following things happen:
- Failure to communicate with you in a prompt and reasonable manner.
- Avoiding settlement of claims for a fair amount when liability has been clearly determined.
- Compelling claimants to accept low arbitration awards because they claim insurers “always appeal” these amounts.
- Discouraging claimants from retaining legal counsel or filing lawsuits until the statute of limitations is about to expire or has expired.
Once you suspect the insurance company of bad faith, you should immediately take steps to protect yourself. The following steps can expedite a claim and put you in a position to take the legal action needed to compel the insurance company to live up to their responsibility:
- Understand the Insurance Game – Insurance companies are in business to make a profit from you and want to minimize claims they have to pay. Accordingly, they will try to settle your claim quickly with a low ball offer or stretch out payments to you over a long period of time.
- File Any Claims Now – Make sure you are aware of all timeframes required by your insurance policy and engage the claims adjustor ASAP. Be aware of the statue of limitations in your jurisdiction and make sure you file any necessary lawsuits well before the deadline. This is usually two years from the date of injury in most jurisdictions, though you should speak with a qualified attorney to determine the precise time limits that apply in your case.
- Retain Your Own Legal Counsel – Do not rely on the insurance company’s lawyer to give you the best legal advice. They work for the insurance company and their employer wants to handle your claim as cheaply as possible. You may have chronic injuries that a lump sum payout will not adequately compensate. A lawyer working for you will fight for your best interests, even it takes time.
- Stick to the Facts – Insurance companies record most phone conversations, meaning whatever you say on the phone or to a claims adjustor can be used to assign fault to you and lower your payout. Use the police report as your guide to tell them only the facts of the incident. Personal opinions, anecdotes, and expressions of guilt or remorse should only be communicated to your personal lawyer, who will advise you about what needs to be communicated to the insurance company.
- Protect Your Information – If you are filing a claim against someone else’s policy, that insurance company may request information from you, such as old medical records or even Facebook account credentials, as part of their investigation. Refer them to your lawyer or your own insurance company. You do not have to volunteer any information directly to them.
Overall, realize that accidents do happen. That’s why we have insurance, and most of the time things work out well. By knowing how to recognize bad faith insurance practices, you can protect yourself and take action before legal deadlines expire.
Larry Bodine is a lawyer, journalist and marketer who speaks and writes frequently about law firm marketing. Currently he is the publisher of the National Trial Lawyers and is the former Editor in Chief of Lawyers.com. Readers can follow @Larrybodine on Twitter, on Google+ and on LinkedIn, where he moderates several marketing groups.
