Can I Sue My Insurance Company if They Treat Me Unfairly?
Your insurance policy is a contract. It is an agreement where you pay premiums in exchange for the insurance company's promise to pay when a covered "loss" happens. But, what do you do if a "loss" happens but the company refuses to pay all or part of what is owed?
In many states, such as Pennsylvania, there is law that requires insurance companies to act in "good faith" toward their policyholders. If they deny a claim that is due or owed, or act unreasonably or recklessly, you probably have a right to bring a suit. Obviously, this would be where: (1) you have an insurance policy, (2) an event happens where you have a loss claim.
There are three main types of legal theories or "causes of action" to bring a lawsuit against your own insurance company: (1) breach of contract, (2) violation of a consumer protection law; and/or (3) violation of "bad faith" law.
First, where the insurance company breaks a rule under the contact, such as not paying for a damage or loss that is covered, this can be a "breach of contact". They did not meet a term or terms in the contract.
Second, many states, including Pennsylvania, have laws that protect consumers who have purchased products or services for family/household use. The purchase of an insurance policy is typically included. These consumer protection laws permit damages for not just the amounts that should have been paid under the policy but also attorney’s fees, costs and other incidentals. It is difficult to get these "extra" damages awarded. Usually it within the Judge's discretion as to whether to award those. The policyholder must prove that the insurance company's actions were unfair or deceptive.
Third, most states also have laws that allow damages if your insurance company acted in "bad faith" when handling your claim. This usually requires a higher level of proof that breach of contract. Typically, you would need to prove that the insurance company had no good reason for what they did and acted in reckless disregard of the fact that it had no such good reason. In addition to the contract damages, it is within the Judge's discretion to award interest, attorney's fees and/or costs.
The bottom line is you don't have to have to file legal action against your company. You paid your premiums. When a claim happens, you would prefer that the insurer simply pay what is supposed to be paid. But, when the insurance company does not pay what is owed, then you may need to file an action to recover.
These types of cases can be pretty complicated. You should consider meeting with an experience lawyer who has handled these types of cases.
ABOUT THE AUTHOR: David E. Schreiber
David E. Schreiber focuses on personal injury cases, insurance claims and insurance disputes. He graduated from Widener University School of Law in 1994. He has successfully handled hundreds of cases, in State and Federal Courts.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.