Can you sue your own car insurance company?

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In a nutshell...
  • There are some less costly, less time-consuming ways to get justice in the event your insurer fails to pay your claim
  • Any method you choose for going up against the insurance company will likely result in you getting paid slower, not faster
  • Suing your auto insurance company is a costly endeavor that may take years to resolve; use it only as a last resort

It is possible to sue your car insurance company, and it happens more commonly than you may think.

The main reason people sue their car insurance company is that they refuse to honor a claim, which falls under the category of bad faith.

Be sure to look at an insurance company’s history before signing up with them to avoid this. Enter your zip code above for FREE car insurance quotes today!

Factors of Bad Faith

Good faith is a broad concept that basically means acting with the sincere belief that you are not causing any malice or harm to the other party.

Bad faith is the opposite and entails any action performed toward you with an intent to deceive, take advantage, or do harm.

Bad faith includes:

  • Taking an unusually long time to fulfill a claim
  • Paying out considerably less than the amount agreed upon
  • Failing to honor a claim without offering an adequate explanation
  • Withholding important details about your claim

Sometimes, the insurance company’s refusal to pay a claim is legitimate and made in good faith.

However, insurance companies can be wrong, and it takes action to uncover the truth.

Fortunately, this action does not always have to mean filing a lawsuit.

There a few steps you can take to mitigate the problem before it becomes necessary to take your insurer to court:

  • Negotiate with the insurer yourself
  • Go up the company’s chain of command
  • Hire a mediator
  • Report them to the state insurance department

If the party at fault is found to have no insurance or is guilty of attempting to commit insurance fraud, then the insurer is within their rights to refuse to pay your claim.

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Negotiating

In order to negotiate effectively, you need to try to be objective. Review your case, your claim, and your desired award the way the insurance company would.

Be mindful of the fact that your claims adjuster is busy, and may just need more time to deal with your case.

Explain your point of view, being sure to provide evidence supporting why you believe your claim ought to be paid.

Be sure to keep a record of any contact with the company and the outcome of that contact in case you need to present it later as evidence in court.

If negotiations fail or you feel that the claim is taking too long even after you’ve given adequate time, go over the head of the insurance representative you’ve been communicating with.

Mediation

Most cases against insurers are settled in mediation. During a mediation, an unbiased third party will hear both sides of the case and work with the two parties to reach a settlement that is fair for both.

In many cases, it is well worth it to accept the settlement to avoid the time and expense of going to court, provided that the settlement is reasonable.

Although mediation is a far more preferable alternative than going to court, be advised that it’s not a speedy process.

It can take up to six months, but it is still faster than going to court, which can take up to three years.

In fact, any type of legal action you take against your auto insurance company is much more likely to slow down your payment rather than speed it up.

State Department of Insurance

There is a possible way you can get justice without adjudication. You can file a complaint against your insurer with your state’s department of insurance.

If the state department deems that the company violated you in a serious way, they will order them to pay a fine.

Otherwise, they will send you a notice that your complaint is on file, along with an order not to adjudicate, which is what happens in most cases.

Although you waive your right to file a lawsuit, it’s an inexpensive way to hold your auto insurance company accountable.

Going to Court
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When going up against your auto insurer, you must make sure that you have a strong case.

Insurance companies have a lot of money and legal power to fight you, and you stand to lose big if your case is anything less than air-tight.

It can take several years for your case to be resolved, and there are numerous expenses to juggle in the meantime.

Some of these expenses are:

  • Attorney’s fees
  • Money to travel to and from the court
  • Filing fees
  • Court fees

It is recommended that you hire the best lawyer you can afford.

You can retain a lawyer for as little as $500 or as much as several thousand dollars. Some lawyers are paid by the hour, and others are paid after the case is won.

Many lawyers opt to get paid after they win your case and typically charge from 30 percent to 60 percent of whatever the insurer awards you.

Things to Consider

Suing your car insurance company should only be considered as a last resort. They take legal threats very seriously and will lawyer up as soon as you start talking about going to court.

It is very likely that they will cease communications with you altogether and let their lawyer do all the talking instead, which can present a problem if you have other policies with the company.

If you’re gearing up for a lawsuit, write up a document letting the insurer know that you want to keep the lines of communication open for your home or life insurance policy.

You don’t want to risk a lapse or cancellation of these other policies just because things with your auto policy fell through.

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