Insurance Legal Information
 

OVERVIEW

Insurance lawyers help individuals and businesses resolve their disputes with insurance companies. Usually, they do this through litigation -- filing lawsuits. Insurance lawyers may handle all types of insurance disputes, or they may specialize in a particular kind of insurance dispute. Insurance lawyers can be roughly divided between the lawyers who handle consumer insurance (the types of insurance that individuals buy) and business insurance.

Types of insurance that most commonly lead to disputes include:

  • Auto insurance -- denial of claims, unreasonably low settlements, uninsured motorists.
  • Health and disability insurance -- illegal rescissions, denial of claims, denial of coverage.
  • Homeowners’ (or renters’) insurance -- water damage, wind damage, theft, fires, dog bites.
  • Workers’ compensation insurance.
  • Disputes between insurance companies -- who is obligated to cover, reinsurance.

 

“WHEN CAN AN INSURANCE COMPANY LEGALLY CANCEL MY POLICY?”

Every insurance policy should state specific situations that constitute grounds for canceling the policy. You can expect your policy to specify that they may cancel your insurance if you don’t pay your premium (subject to a grace period in most states), you intentionally misrepresented facts on your application, or you defrauded the insurance company in some way. State laws often limit what sorts of grounds for cancellation are legal. If your insurance policy contains grounds for cancellation that aren’t legal in your state, the company cannot legally cancel your policy.

State laws also regulate when an insurance company can refuse to renew your policy. Refusing to renew isn’t the same as canceling your policy, legally speaking. But an insurer cannot refuse to renew for any reason prohibited by law, such as race or gender. Also, in most states, the insurer must give you written notice 30 days in advance of declining to renew auto or homeowners’ insurance. In some states, insurers are not allowed to refuse to renew certain types of consumer insurance policy.

 

“WHEN CAN AN INSURANCE COMPANY LEGALLY REFUSE TO COVER ME?”

Like most businesses, insurance companies cannot refuse to serve members of a protected demographic group, like a racial minority. These groups may vary from state to state, but will always include race, sex, national origin, religion, ancestry and color. In some states, these also include marital status, age, sexual orientation, language, occupation, disability or area of residence.

In general, insurance companies’ reasons for denying coverage must have a legitimate relationship to the financial risk of insuring you. You have a legal right to know an insurer’s reasons for declining to cover you. A few states have laws requiring health insurers to cover everyone. Some also limit insurers’ ability to charge different rates for the same coverage.

 

“WHAT CAN I DO IF THE  INSURANCE COMPANY WON’T PAY A LEGITIMATE CLAIM, OR WON’T PAY WHAT MY CLAIM IS WORTH?”

If your claim is truly covered by the policy, it is illegal for the insurer to deny any or all of it. All insurance policies are contracts, so denying a legitimate claim is a breach of contract. When it’s your own insurer, this is often called “insurance bad faith” by the law. Insurers commonly deny claims because they believe the claims are not covered by the policy, the person making the claim is not insured by the policy, or the person making the claim did something wrong that voided the policy. Sometimes this is the truth, but it can also be an excuse for insurance bad faith.

If you believe you’re a victim of insurance bad faith or a breach of contract, and the insurance company won’t negotiate, you can do two things:

    1. You can complain to your state’s Department of Insurance or another state agency that regulates insurers. If they think your claim is valid, they will investigate the situation and levy fines on the insurer. Often, this investigation will change the insurer’s mind about your claim. However, it may take months or even years.
    2. You can talk to an insurance lawyer about filing an insurance bad faith lawsuit. This option is best for people who need their claim settled quickly, or who believe an investigation will not change the insurer’s mind. You can file a lawsuit and a complaint with regulators at the same time, and many people do.

Some policies require you to take lawsuits to out-of-court arbitration or mediation, types of private dispute resolution, instead of a conventional court. A lawyer can and should represent you in arbitration or mediation, and may be able to have the case removed to a court.

 

“WHAT CAN I DO IF MY INSURANCE DROPS ME FOR A REASON I FEEL IS NOT LEGITIMATE?”

Dropping your coverage (also called a rescission) for reasons not listed in the policy is a breach of contract, just like refusing to pay a legitimate claim. If you believe you’re a victim of an illegal rescission, you can complain to the government agency in your state that regulates insurance. You can also pursue an insurance bad faith lawsuit, instead of or in addition to a regulatory complaint.

Often, victims of illegal rescissions were dropped because they have expensive needs the insurance would have covered. For that reason, most prefer to get an insurance lawyer involved quickly, in order to secure the funds they needed all along. An insurance bad faith lawsuit will help you recover all of the costs the insurance would have covered. In some states, you can also recover your lawyer’s fees. And if the insurer knowingly did something illegal or otherwise wrong, you may also be able to collect punitive damages, which are meant to punish the defendant’s wrongdoing.

 

“SHOULD I JOIN A CLASS-ACTION INSURANCE LAWSUIT?”

If you’re eligible to join a class-action lawsuit, you’re automatically part of the suit. You may still have to take action to be included in the lawsuit’s financial settlement and court actions.

You also have the legal right to opt out of the class action and pursue an individual claim. Which option is right for you depends on how much you lost and how much you stand to gain by joining the class action. Many class actions settle for relatively low amounts of money per person. If you lost a lot of money or suffered greatly because of the insurer’s illegal actions, you should consider opting out and suing the insurer on your own. If you’re not sure, talk to an insurance lawyer for help.

 

“CAN AN INSURANCE LAWYER HELP ME WITHOUT GOING TO COURT?”

It’s very likely that an insurance lawyer can help you without going to trial. In fact, most insurance lawsuits never see the inside of a courtroom. That’s because insurance companies are much more likely to take your dispute seriously when you hire a lawyer, according to studies. Statistics also show that you are likely to get more money from an insurer when you have a lawyer. Insurance companies know that many people don’t negotiate with them, because they don’t understand their rights or don’t believe they can win. When you have a lawyer, you’re showing that you mean business.

Insurance lawyers can help outside court in two ways:

  1. They can negotiate with the insurance company, using knowledge of the law and of insurers’ tricks, to get your claim paid in full without having to sue.
  2. They can file a lawsuit, then negotiate a settlement before the case goes to trial. This can take months or just a few weeks, depending on the circumstances.
     

PAYMENT

Insurance lawyers may work for an hourly rate or for contingency fees. Which type of fee your lawyer asks you to pay will depend on the lawyer’s preference, where you live and what type of case you have. Your insurance lawyer should tell you in advance which type of fee he or she will charge and give you a rough idea of how much it should be. Most insurance lawyers offer free initial consultations.

Hourly rates are most likely in insurance matters between businesses. The bigger your city, the higher the hourly rate is likely to be. By contrast, contingency fees are most likely in cases where an individual is suing a company, and in states that allow you to sue an insurance company for attorneys’ fees. Under a contingency arrangement, you will not be asked to pay the lawyer at the beginning of your case. Instead, you and the lawyer will agree on a percentage of the winnings that will serve as fees, before he or she takes the case. If you lose the case, the insurance lawyer gets nothing. You may still be asked to pay for court fees and help from paralegals. This arrangement allows insurance lawyers to represent people who normally might not be able to afford legal fees.