Few things are more frustrating than the feeling of betrayal when an insurance company, meant to protect you, denies your claim. Dealing with a property damage claim denial can leave policyholders feeling helpless and financially strained.
The good news? You may not have to accept their denial as the final word. Policyholders have the right to take legal action when an insurance company handles claims unfairly. This guide will walk you through when and how to sue your insurance company, as well as steps to take if your claim has been denied.
Why Do Insurance Companies Deny Claims?
Insurance claim denials can occur for various reasons. To better understand your options, it’s essential first to determine why your claim was rejected. Here are some common reasons:
- Policy Exclusions or Limitations: Your insurance policy may include terms or exclusions that limit coverage for specific situations or types of damage. For instance, homeowners may be surprised to discover that certain disasters, such as floods, are not covered unless they purchase additional insurance coverage policies.
- Lack of Evidence or Documentation: If you fail to provide sufficient evidence, such as police reports, photos, or bills, your claim might be considered invalid.
- Missed Deadlines: Most insurance policies have strict deadlines for filing claims. Missing these deadlines can result in immediate denial.
There are also cases where claim denials are simply unfair, don’t have a valid reason for the denial, or are even illegal. This is especially true if the denial is due to misconduct by the insurer. Policyholders may have legal recourse when the denial is due to bad faith practices or breaches of contract.
What is a Bad Faith Insurance Claim?
Insurance companies are required to act in good faith when handling claims. This means they must evaluate claims honestly and fairly while adhering to the terms of your policy. When an insurer fails in this responsibility, it may constitute bad faith.
Examples of bad faith practices include:
- Refusing to pay a valid claim without a legitimate reason
- Unreasonable delays in processing claims
- Grossly undervaluing your damages
- Misrepresenting the terms of your insurance policy
- Failing to investigate a claim properly
Bad faith claims are serious and can result in significant legal consequences for the insurer. Suing your insurance company for bad faith may enable you to recover damages beyond just the value of your original claim.
Can You Sue Your Insurance Company for Denying Your Claim?
If your insurer continues to deny your claim unfairly after following the steps above, you may be left with no choice but to take legal action. Here are some situations that may warrant a lawsuit:
- Bad Faith Lawsuits: Your insurance company acted in bad faith. This holds the insurer accountable for dishonest or unreasonable practices.
- Breach of Contract Claims: They breached the terms of your insurance policy. You can sue the company for violating the agreed-upon terms of your insurance policy.
- Negligence Claims: The denial resulted from negligence by an insurance agent or the company itself. You can sue your insurance company for negligence if the insurer or its agents failed to meet their duty of care.
By pursuing legal action, you may recover financial compensation or a settlement offer such as:
- Unpaid claim amounts
- Punitive damages, which punish the insurer for bad faith
- Attorney’s fees and court costs
- Emotional distress compensation for the frustration and anxiety caused by the denial
Steps to Take After a Claim Denial
If your insurance provider has denied your claim, don’t panic. Taking the following steps can help you challenge the denial and build a stronger case if legal action becomes necessary.
1. Understand Your Policy
Carefully review the terms of your insurance policy to confirm what is or isn’t covered. Look for any exclusions or conditions the insurer cited when denying your claim.
2. Request an Explanation
Ask your insurance provider to provide a written explanation of their decision, referencing the specific sections of your policy that justify the denial. Having this in writing is crucial for building a case.
3. Gather Evidence
Compile any evidence that supports your claim, such as:
- Photos of any damage
- Written estimates from contractors or repair professionals
- Bills for any completed work
This documentation can strengthen your argument against the insurance company.
4. Work with a Public Adjuster
Public adjusters are independent experts who can reassess the damages to determine whether your insurer’s denial or valuation was fair. This can provide additional legal advice for whether you should file an appeal or lawsuit.
5. File an Appeal
Most insurance companies offer a formal claims appeal process. Send your appeal, along with supporting evidence, to your insurer, addressing any issues they mentioned in their denial letter. Your legal team can also help you with filing a formal complaint with your state’s Department of Insurance to help resolve the dispute between you and your insurer through mediation.
How to Sue Your Insurance Company
Taking your insurance company to court is a serious step, but with the right preparation and legal representation, you can level the playing field. Here’s how to get started.
1. Hire a Qualified Insurance Attorney
Insurance law is complex. Hiring an attorney who specializes in insurance disputes can significantly improve your chances of success. A qualified insurance attorney will know how to gather evidence, build a strong case, and negotiate with insurers.
2. Prepare Your Case
Work with your attorney to collect all necessary documentation, including:
- A copy of your insurance policy
- Claim denial letters
- Photographic evidence, receipts, and repair estimates
- Communications with your insurer
3. Work Closely With Your Legal Team
Your attorney will guide you through each step of the lawsuit, which typically includes filing the complaint, the discovery process (where evidence is exchanged), and settlement negotiations or trial. During a trial, you may need to sit for a deposition during which you must answer questions under oath.
4. Follow State Laws
Different states have different laws regarding insurance claims, bad faith claims, and deadlines for filing lawsuits. Be sure to consult an attorney who is familiar with the laws in your state regarding insurance.
How Merlin Law Group Can Help
At Merlin Law Group, we understand the challenges policyholders face when dealing with unfair insurance practices. With decades of experience fighting for consumers across the nation, our law firm is ready to help you hold your insurance provider accountable.
Why Choose Us?
- Trusted Expertise: We have nearly 40 years of experience in insurance disputes.
- Proven Success: We have recovered over $2 billion for policyholders.
- No Fee Unless We Win: You don’t pay unless we recover compensation for you.
If your claim has been wrongfully denied, don’t wait. Schedule a free consultation with an experienced attorney today to explore your legal options.
FAQs
Is it worth suing an insurance company?
Yes, especially if the denial of your claim has caused significant financial loss or emotional distress. A lawsuit can help you recover unpaid claims, court costs, and even punitive damages.
How much can I sue my insurance company for?
The amount depends on the specifics of your case and may include unpaid claims, attorney’s fees, emotional distress damages, and more.
How long do I have to sue?
The time limit, or statute of limitations, varies by state. For example, in California, you generally have two years to file a lawsuit for bad faith by the insurance company and four years to bring a claim based on the breach of the written contract. Consult an experienced insurance lawyer to avoid missing deadlines.
Do I need a lawyer to sue my insurance company?
While it’s not legally required, having a qualified attorney increases a claimant’s chances of a favorable outcome significantly.
