Can I Sue an Insurance Company for Denying My Claim?

September 30, 2020

While there are valid reasons an insurance claim is denied, sometimes the denial is made in bad faith. As for-profit businesses, insurance companies benefit from the money saved, not the claims paid. Therefore, insurance companies have an interest in limiting payments and diminishing the value of claims to protect their profits.

Unfortunately, the drive for profits can result in illegal denials of valid insurance claims. If your claim is denied without cause, you may be able to sue your insurance company to recover costs.

What should you do if your claim is denied? Here is what you need to know about insurance claims:

What should I do if insurance denies my claim?

Whether your claim is denied by health insurance, property insurance, auto insurance, or business insurance, you could be left with costly unexpected expenses. Regardless of the type of insurance claim, the first step of recourse is to look for the reason the claim was denied. Then, carefully review your insurance policy and your claim to verify whether the denial is valid.

If your claim was wrongfully denied, you can appeal. Gather all evidence relevant to your claim including bills, medical notes, receipts, repair quotes, and any documentation of lost wages or other financial harm. If there is anything you did not already submit to your insurance company’s claims adjuster, be sure to include it with your appeal to your insurer.

An attorney can help expedite the process and spare you from the lengthy burden of fighting with your insurance company. There are time constraints for filing suit against your insurer when a claim is illegally denied, so it is important to speak with an experienced attorney as soon as possible to ensure your efforts are timely.

What is insurance bad faith?

All insurance companies are obligated to treat policyholders fairly and in good faith. In California, the legal duty of good faith includes an obligation for insurance companies to promptly pay valid claims.

Examples of bad faith include denying coverage without cause, refusing to pay full benefits for a claim, failure to pay a valid claim promptly, and denying a claim without just cause. California law allows for tort damages and punitive damages when an insurer breaches this duty.

What is a first-party insurance claim?

 When an insurance company is sued by the insurer individual, this is called a first-party claim. The duty of good faith only extends to the first-party relationship. In other words, you cannot sue someone else’s insurance company for bad faith because unless you are directly insured by the company, the insurer does not owe you a duty of good faith.

Do I need an attorney to file a claim against my own insurance company?

While you do not need an attorney to appeal a denied claim directly with your insurance company, it is beneficial to involve an attorney sooner than later. Contact an experienced insurance attorney to join you in the fight to recover the financial benefit you deserve from your insurer.

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