Insurance Claims - Disputes

While an insurance company owes its clients a duty to act in good faith, you should always keep in mind they are commercial enterprises that have the goal of maximizing their profit.

This means the less they pay you, the more money they earn for their shareholders. You have to look out for yourself.

Your insurance company is not your enemy, but it is also not your friend. While insurance companies have a legal duty to place their client's interests above their own, they rarely do so. Far too often, they unreasonably delay paying their clients in order to maximize their profits. Sometimes they deny claims that should have been paid, and routinely, aggressively defend against claims in order to pressure their clients into accepting less money Insurance companies know you are relying on them when you make a claim and you are likely to be vulnerable to their tactics. If they can wear you down so you take less, they earn more.

Insurance companies want you to believe their adjusters are your new friend and are trying to help you obtain a fair settlement. Part of their training often involves techniques in how to make the insured believe the adjuster is looking out for the insured. The truth is that the claims department is a profit center for the insurance company. The less they pay out, the more money the insurance company earns. Often insurance adjusters are paid bonuses if claims paid out are below a certain percentage of premium revenues. They won't tell you this important fact.

Some insurance companies are better than others. Some are worse than others. What is important is that the insured must protect his or her interest because the interest of the insurance company is to protect the insurance company.

What can I do if my insurance company denies a covered claim?

You can file suit for breach of contract and possibly a tort action seeking damages based on the insurer's bad faith handling of the claim.

Can recovery of damages for an insurer's bad faith exceed what the insured is entitled to receive under the insurance policy?

Yes. In addition to what the insurer is required to pay under the policy, if the denial is unreasonable, you may be able to recover "consequential damages" (money you were required to pay because of the denial) and "extra-contractual damages" which are designed to punish the insurance company and to deter it from wrongfully denying similar claims in the future.

What obligation does my insurance company owe me regarding my claim?

An insurance company has an obligation or duty to handle a claim reasonably, promptly, and in good faith.

What is the duty of good faith?

It means that your insurance company must:

  1. Pay or deny (adjust) your claim within a reasonable period of time,
  2. Timely respond to your phone calls and letters.
  3. Inform you in writing why it is denying your claim specifying each contract provision upon which it is relying,
  4. Attempt to find a basis for paying the claim rather than reasons to deny it, and
  5. Treat you fairly.

What obligations do l owe my insurance company when making a claim?

You must:

  1. Submit your claim timely,
  2. Provide all information reasonably requested,
  3. Provide a statement under oath concerning the claim, and

Reasonably cooperate with the insurance company.

Will the State of California Department of Insurance (DOI) help me if my claim is unreasonably denied?

Possibly, but don't rely on it. They do not respond to every complaint and sometimes their responses are inadequate. Never wait to pursue a claim because you are waiting for the DOI to investigate or act. You may never receive a response or the response may come too late. If you fail to comply with a notice requirement, you may lose your right to recover damages. If you allow the statues of limitations to run, you will definitely lose your rights to recover. In short, do not delay making a legal claim.

Is there any general advice you can offer when making a claim?

Yes. After calling the insurance company, always summarize the complete conversation in a letter addressed to the person to whom you spoke. The letter should refer to the date your conversation took place, and a copy should be retained. The initial claim letter should be sent by certified mail, receipt requested.