Insurance Company Negligence 101
Insurance company negligence is in the eyes of the law a big difference from an average negligence case. What may be considered a negligent act on behalf of the insurance company could very well be legally appropriate or in some cases even required. These are times when an agent may mistakenly deny coverage due to a lack of knowledge regarding certain aspects of coverage.
Usually, if there is any type of miscommunication or delay in what is called "good faith" effort on the part of the insurance company it is when they are dealing with insured.
In some cases insurance companies have been known to not pay for damages caused by natural disasters like Hurricane’s, Earthquakes or certain types of flooding because they did not inform the insured when they sold them the policy that flood insurance was not part of the coverage. This is also a situation where the insurance company has committed negligence. If the insurance company knows that there is a history of flooding in the area where they sold the policy and they failed to advise their client of this fact and that a separate type of flood insurance would cover them, the insurance company will have to deal with it in court.
In other instances it may just be negligence on behalf of an insurance agent that causes the client to be under insured. If someone has home insurance it is imperative that they let their agent know immediately of any kind of renovation, addition or window replacement. These all increase the value of the home and if they do not increase the amount of coverage it will leave the policy holder under insured and paying for repairs and replacement out of pocket. Some people just tend to forget to let their agent know, on other occasions the agent failed to inform their client.
As mentioned , negligence on the part of an insurance company will often be a result of a miscommunication. A very basic example of this would be if your car was in an accident and you follow "good faith" and contact your insurance company to advise them of the accident and follow instructions.
In some cases the agents will take or refer you to a facility that is not a close as your home, like an hour away. If you are ordering a vehicle repair while you are at the repair shop, it should not take longer than the morning or the afternoon. If you were not given a lift back home, the agent must find another way for you to get home. Regardless of what the circumstances are they must make an effort to ensure your needs are met and that you are not responsible for the cost of a taxi fare.
A large number of cases where insurance company negligence is involved correlates with them not properly investigating a claim. Let us again use a car accident as an example. When you encounter an accident and you take action immediately, either contact the insurance agent yourself or tell a police officer on scene to have them contact your insurance agent, someone from the insurance company will contact you and ask for a typed account of your version of events. Someone will also come to your home or the accident scene to record the details of what happened. So far it is all well and good, the trouble begins if what you have told them is not corroborated by the accident reconstruction report and other witness statements. An accident reconstruction report is produced if there is any sort of dispute of who was at fault.
If your version of events cannot be confirmed by the report, the insurance company will deny your claim in bad faith. It is then time to take them to court as the only course of action the insured.
Basis for Suing an Insurance Carrier
In order to succeed with a lawsuit against an insurance company for negligence, you must establish the existence of a legal duty that was owed by the insurance company to you. The jury in your trial will be able to apply the law to the facts establishing that the insurance company had a legal duty to you by quoting the following precedent-setting case law.
Under Florida law, an insurance company has a duty to use "such reasonable care as is required by the demand made upon it." See Bennett versus St. Paul Fire and Marine Ins. Co., 92 So. 2d 229 (Fla. 1956). If, through its failure to exercise such reasonable care, the insurance company exposes you to a risk of harm that would not have existed had the insurer performed its duty, then the insurer’s negligence is actionable under Florida law. See Iacono versus Iacono, 109 So. 2d 419 (Fla. 1959).
In general, courts across Florida recognize the legal duty of an insurance company to act in good faith and with due care in investigating and settling claims within the available insurance coverage. See Zawisza versus State Farm Mutual Automobile Ins. Co., Case No. 05-CA-495 (Fla. 5th DCA Apr. 6, 2007); Ikolo versus American Eagle Fire Insurance Co., 823 So. 2d 859 (Fla. 4th DCA 2002); Hayes versus The Nationwide Mutual Fire Insurance Company, 100 So. 2d 412 (Fla. 1958).
In a case that went all the way to the Florida Supreme Court, the Court held:
An insurer has a legal right to refuse to settle a claim where there is no liability on the part of the insured. The question is in what situation an insurer has the right and responsibility to settle a claim in order to protect the insured, even though the insured may not be liable? Like an attorney, the insurer has a duty to protect the interest of his client.
[W]here the defense of the action is dependent upon the existence of the insurance coverage, and the insurer, without obtaining consent or taking proper steps, including the procurement of an extension of the statute of limitations, withdraws from (continues to defend) the case for the purpose of allowing a verdict exceeding its coverage and leaving the assured exposed to a claim which could not have been sustained without a verdict in excess of the policy limits, the insurer will be charged with a breach of good faith in its consideration of the protected party’s interests.
Hayes at 417.
This idea has been further refined by the Fifth Circuit Court of Appeals, which specifically provides that the insurer "must make settlement offers based on the likely outcome of the pending litigation and the harms if an adverse verdict exceeded the policy limits." Appalachian Corporation v. Bankers Life & Casualty Company, 119 F.3d 149 (5th Cir. 1997).
In some situations, even the incorrect evaluation by the insurer can constitute actionable negligence against the insurance company. See Safeco Insurance Company of America versus Egan, 640 F.2d 7 (5th Cir. 1981).
Pre-Course of Action before Filing a Lawsuit for Negligence
Before pursuing a lawsuit based on an insurer’s negligent handling of a claim, an insured should be well-prepared and do his or her "homework." Even if the insured has suffered a loss, there must be a clear showing that the insurer’s delay and/or wrongful denial caused the insured to suffer additional financial damages. Here are some steps a policyholder should take: Find Out What Caused the Loss Whether it’s property damage, personal liability or a denied health insurance claim, the insured should seek to determine whether the negligence of the insurance company caused a loss, and whether suing is worthwhile or even possible. The insured should review the facts and documentation of the case – including the policy coverages involved, any exclusions, and the basis for the insurance company’s delayed claim payment or denial of the claim. The insured should also verify that the insurance company complied with good faith principles. Collect Evidence Evaluating the claim may require that a policyholder find witnesses, much like in a court case. Copies of all claim-related documents should be kept. Letters supporting the insured’s position should be collected. Be sure to keep originals of all correspondence with the insurance company and send copies only. The insured should take appropriate steps (detailed in the next section) to preserve evidence of the claim file. The insured should also keep records of all communications with the insurance company and his or her attorneys. Consult a Lawyer with Experience in Claims Handling The insured may benefit from consulting an attorney regarding the facts in his or her particular case and whether filing a lawsuit against the insurance company offers the opportunity for an acceptable judgment.
How to File the Negligence Lawsuit
Filing a lawsuit against an insurance company when they have acted negligently is trickier than it sounds. There are very limited grounds for suing an insurance company outside of contract law, and these if not properly met will result in either a dismissal with prejudice which esentially means you can never sue them, or a dismissal without prejudice which gives you a chance to refile the case after correcting the issues the Judge found. For example, sometimes there are claims that you could make but didn’t make in the original filing. Here, that is not the case. The only issue is whether your insurance company owes you money or not.
Insurance companies are extremely well represented. A big law firm is going to be representing them. Putting on a case against them is going to be very difficult. Unless you have a legitimate injury, your case will likely get kicked out by a Judge if you cannot prove your case. In order to avoid being dismissed, you must make sure that your pleading contains all of the jurisdictional and factual information necessary to state a claim for which relief may be granted. You must also make sure that you have enough evidence of damages to put the insurance company in jeopardy of paying you.
The cost of taking a non-legitimate case to trial could run into the hundreds of thousands of dollars. It must be a compelling case before you consider filing suit against an insurance company.
Possible Results in an Insurance Negligence Suit
If you are successful in your case against the insurance company for negligence, the outcome could include compensatory damages, other remedies and punitive damages.
Compensatory damages refer to those damages that are awarded based on the wrongful act. For example, if your insurance company denied your claim that they should have paid, compensatory damages would be what they should have paid. So, if your house burned down and a fair determination was made that your claim should have been compensated in the amount of $50,000.00, then you would be entitled to compensatory damages in that amount. Furthermore, if you successfully sued the insurance company for reducing your compensation by an unfair amount, then the damages would be based on the difference between what they actually paid you and what they should have paid you. In instances where pain and suffering was involved, damages may be much higher. If we returned to the fire example and your pain and suffering was determined to be approximately $1,000,000.00, then the compensatory damages would be $1,000,000 . 00.
Pursuant to Restatement §917, parties who are negligent may be liable for damages to another party even though the other party fails to act reasonably. This means that if the insurance company acted negligently in denying, reducing or delaying in compensating you for your claim and you failed to take all reasonable steps to recover, that might not affect your compensatory damages.
Aside from compensatory damages, if you are successful, you may also be able to recover damages for other remedies; for example, you may be awarded interest if your insurance company unreasonably delayed in paying you benefits.
Additionally, if the insurance company’s actions were done knowingly or intentionally, you may be awarded punitive damages. Compensatory damages are meant to make the injured party whole, while punitive damages are meant to punish the party who did wrong and give society an opportunity to prevent the wrongdoer from committing the same wrongful acts again. These awards can be much higher than compensatory damages.
Hints on How to Make a Successful Case
To have a solid chance of successfully suing an insurance company for negligence or bad faith, there are a few things you should do to make yourself and your case as prepared as possible. Obtain all available documentation for your claim. If your claim is a denied claim, get a copy of your policy, your original claim paperwork, and any correspondence from the insurance regarding your claim. If you have made a claim against the insurance company for an accident, make sure you have collected your medical paperwork, your prescription records, and your bills. Pass on all the information about your claim to your attorney that you have collected. Make sure you give your attorney copies of everything so they can build the strongest case possible on your behalf. Consider getting a lawyer with experience in this area. While it’s technically possible to sue without a lawyer, it’s much more likely that your case will be successful if you have an attorney with experience suing insurance companies specifically for bad faith. When you meet with your lawyer, know if there are any rubrics they want you to comply with to avoid problems with the case. For instance, some lawyers do not want their clients to post about personal matters on social media while their case is ongoing, as this may provide the insurance company with ammunition to use against you to try to get out of paying.
Other Options to Suing: Settling with Insurance Companies
In some cases, litigation may not be the appropriate way to obtain a negligent insurance company’s consent to pay a claim. Although in many instances the only way to obtain a fair recovery from one of these well funded companies may be to file a lawsuit and pursue a claim into court, there are often opportunities to encourage the insurance company to bring forth a fair money offer in the case without the need for filing suit with the court system.
In such cases, rather than filing a lawsuit , the best option is to get the adjuster on the other side of the case to offer a fair amount of recovery for the injured victim through negotiation prior to drafting the lawsuit and presenting it to the court. Negotiation does not require the rules that govern courtroom presentation of evidence and particular discovery requirements, and in many cases a fair amount of compensation can be found even before a lawsuit needs to be filed.
Although some cases will require a lawsuit to be filed in order for the victim to receive full compensation from the insurance company, there are many cases for injuries that are a little more minor or injuries that require ongoing medical care that can be handled through negotiation. In such cases, no litigation may need to be filed to see the victim receive compensation from the insurer.