How to sue an insurance company after a car accident

If you were in a car accident and the insurance company denied your claim, you may be able to sue the insurance company for a "bad faith denial" of your claim. However, before trying to win in court, you should try to settle the matter out of court with the insurance company. A lawsuit against your insurance company will require you to show that the insurance company failed in its duty of good faith and fair dealing.

Understand auto insurance. An insurance policy is a contract between the insured and the insurance company. The insured pays the premiums and the insurance company, in exchange, undertakes to cover the cost of certain claims. Generally, an insurance policy will cover two types of claims: first-party claims and third-party claims.

• • A “first claim” is paid directly to the insured. For example, some insurance policies will cover damage to the insured's car or even an injury sustained by an insured. If you damage your car, you can ask the insurance company to pay to repair it. Your insurer may also cover the bodily injury you have suffered. Many drivers make sure to get coverage for “first party” claims because they are worried that other drivers won't have insurance. Indeed, in a "no-fault" state, you will have no choice but to file a complaint against your insurer following an accident. 
  • A “third party claim” involves injury or harm to a third party. For example, if you are in a car accident and a jury finds you at fault, your insurance company should pay some or all of the damages you owe the other driver, up to your coverage limit.

Participate in a personal injury lawsuit. When drivers have an accident, they often sue. They do not sue each other's insurance companies. Instead, the insurance company will “indemnify” its insured, ie it will pay some or all of the damages due, provided that the claim falls under the insurance contract. If the insurance company refuses to pay a valid claim, then its insured can sue it for bad faith.

• • If you win at trial but the other driver's company refuses to pay, you generally cannot sue the insurance company for "bad faith." Indeed, the duty of good faith is due to the insured and not to injured third parties. If you are injured and the other party's insurers refuse to pay a claim in bad faith, then you can see if the state allows the other party to "assign" their lawsuit to you. bad faith.

Understand the duties of an insurer. An insurance policy carries an implicit covenant of “good faith and fair dealing” on the part of the insurer. This means that he must perform all of his duties “reasonably”. An unreasonable delay or refusal to pay a valid claim is an example of bad faith.

• • Other duties include the duty to reasonably investigate a claim and the duty to defend against a claim.

Identify “bad faith” behaviors. Bad faith can take many forms. To see if you have a bad faith claim against your insurer, you should look for the following:

• • Deceptive practices or deliberate misrepresentations to avoid paying claims.
  • Deliberate misrepresentation of case language or policy in hopes of avoiding coverage.
  • Unreasonable delay in settling claims or failure to investigate.
  • Unreasonable litigation conduct.
  • Arbitrary or unreasonable demands for proof of loss.
  • Coercive or abusive tactics are used to settle a claim.
  • Oblige and insured to contribute to the settlement.
  • Failing to fully investigate the complaint by its procedures.
  • Failing to maintain adequate investigative procedures.
  • Failing to disclose policy limitations and explain applicable policy provisions or exclusions.

Hire a lawyer. To understand if you can sue for "bad faith", then you should talk to an experienced attorney. An experienced lawyer will be able to identify any conduct by insurance companies that could be characterized as “bad faith”. Also, an attorney will know if your state allows "bad faith" claims in your particular situation.

• • To find an experienced attorney, you should visit your state bar's website, which should operate a referral service. You can search for lawyers by location and specialty.
  • You should look for a lawyer who deals with car accidents. If your state's referral system does not allow you to filter results by this specialty, look for someone who practices personal injury law.
  • When you find a lawyer, you should call and arrange a consultation. During the consultation, you should ask the lawyer if he has experience in this type of lawsuit. Not all personal injury lawyers will have experience suing insurance companies for bad faith.

Obtain a copy of the insurance policy. The insurance policy is the basis of your legal action. An insurance company should only cover claims that it has agreed to cover in the policy. Therefore, you should familiarize yourself with your policy.

• • Also, share a copy with your lawyer. Your attorney should know the extent of your coverage. Even if the insurer acted reasonably in denying your claim, you may still have different causes of action against the insurer.

Ask the insurer why a claim was denied. You should ask your insurer why they are not honoring a claim. You must specifically ask your insurer to put in writing the reasons for their refusal.

• • Your letter may force the insurance company to change course and stop denying your claim. Even if you fail in this regard, you also create a paper trail of proof that the insurance company entered into bad faith.

Keep all communications with your insurance company. Since your insurance company will be the defendant in your lawsuit, you should keep copies of all communications with the insurance company. Save all of the following:

• • letters
  • Emails
  • Voice messages
  • Notes of any face-to-face conversations or unrecorded phone calls

Keep all evidence related to the claim. If you are suing in bad faith, then you will want to keep all evidence relating to your lawsuit. This proof can take several forms:

• • If your insurance company has refused to pay or defend you in a car accident lawsuit, then you'll want information about the money you spent defending yourself in a personal injury lawsuit. You should also keep information such as any written judgments rendered against you by a court, as this will show how much you owe a third party.
  • If your insurance company has denied the first-party claim from you (for example, for damage to your car), then you will want evidence showing the damage or injury. This can take the form of medical bills, physiotherapist bills, as well as auto repair shop bills.

Report a violation, if necessary. State law may require that you notify the insurer and your state Department of Insurance in writing of any violation. In Florida, for example, you must inform the insurer and the Florida Department of Insurance. The insurer then has 60 days to remedy the situation. 

• • To find your state's Department of Insurance, visit this map and select your state.

Participate in settlement negotiations. Your attorney can contact your insurance company and seek to participate in settlement negotiations. Negotiations can also take place after you file a complaint. Either way, you should take settlement negotiations seriously. A successful settlement will allow you to avoid the lawsuit.

• • Your lawyer has an ethical duty to inform you of settlement offers. Even if your lawyer doesn't want to commit to a settlement, they still need to tell you. Ultimately, the decision is to settle your decision, not your lawyer's.

File a complaint. If your state allows a lawsuit against an insurer for bad faith, your attorney will initiate the lawsuit by filing a lawsuit in court. The complaint will list the facts as you allege them and seek the relief requested. In this type of lawsuit, you can be compensated not only for your injuries but sometimes an additional amount in punitive damages. 

• • To get punitive damages, you generally have to allege that the insurance company's conduct was malicious, oppressive, or fraudulent. 
  • You shouldn't wait to bring a costume. States have a strict “statute of limitations”. These laws require you to take legal action within a certain time frame. In Nevada, you will have four years from the adverse action of the insurer to file a complaint. However, in Indiana, the statute of limitations is two years and could be shortened by the police themselves.

Sit down for a deposition. One way an insurance company can defend itself is to claim that you are responsible for its failure to investigate or settle a claim. For example, the insurance company might claim that you failed to report an accident properly, that you failed to provide the insurance company with the requested documents, or that you breached your contract in some other way. Therefore, you should review your communications and documents to ensure that you followed the policies of the insurance company.

• • You must prepare your statement with your lawyer. In a deposition, you will answer questions under oath in front of a court reporter. You can prepare by doing a “trial” where your lawyer pretends to be the insurance company's lawyer.
  • Preparing for a deposition is also good preparation for trial, where you will also answer questions from a lawyer. Focus on listening carefully to the question and answering only the question asked. Do not volunteer information.
  • If you don't know the answer to a question, say "I don't know". Never guess.

Choose a jury. Before the trial can begin, you must choose a jury through a process called a voir dire. During this process, lawyers will ask potential jurors questions to uncover their biases. If a juror admits to being biased against your case, then your attorney can strike them "for the cause."

• • Your attorney will also have several peremptory challenges. With these challenges, your lawyer does not have to explain why the juror was removed from the panel.
  • You may have the option of a bench trial. As a plaintiff in this type of lawsuit, you should be tried by a jury. Juries tend to return big verdicts to plaintiffs when suing insurance companies. In many states, you can sue for “punitive” damages and therefore can collect much more from the insurer than you owe the injured driver.

Present evidence. As the first party, you will present evidence. You will call witnesses to testify and admit documents into evidence. Your attorney should try to start and end the case strongly, sandwiching the weaker witnesses in the middle. Often, your lawyer will try to build a bad faith case on common themes, such as showing a bad faith "pattern or practice" within the insurance company. Your attorney may call the following witnesses:

• • you (the insured)
  • the claims adjuster
  • an expert who can testify to industry standards and who can explain how your insurance company failed to meet those standards

Wait for the verdict. Once the evidence has been presented, the judge will read the instructions to the jury before they retire to deliberate. In-state courts, verdicts do not have to be unanimous.

• • If you are not satisfied with the result, talk to your lawyer about possible recourse. Appeals can be costly, and the cost of litigation can affect whether or not you want to pursue the bad faith action.