Can I Sue My Insurance Provider for Delay of Payment?
Insurance Company Delays Explained
Insurance delay is one of the most common complaints we hear at Florida Insurance Claims. We regularly have clients who are despondent about the length of time it is taking to resolve a claim or just to be paid for a covered loss. Insurance companies often have a tendency to slow play claims, hoping that payment gets delayed long enough that the insured will simply lose interest or give up waiting. Over the years, our lawyers have developed a comprehensive litigation strategy to combat this ploy.
Every adjustment is different so there is no perfect way to guess what goes through an adjuster’s mind when deciding whether to delay a claim or not. The most frequent reasons we see claims being unnecessarily delayed is due to an adjusters investigation and paperwork issues.
The investigation process can often take weeks if not months for certain types of claims. Delays can add up as he or she tries to collect statements, process paperwork, conduct examinations, find out which engineers or experts to use in order to determine the cause of loss, hire the experts (who all have their own caseloads), and review the reports the experts draft. Sometimes, the claims process is just slow. Sometimes, it is being slowed down with the intent or hope that you will just stop pursuing the claim. Unfortunately, your insurance company adjuster will not tell you what is really going on behind the scenes.
Many times, claims are delayed for paperwork issues . These issues are not always the fault of the insurance company. In one recent case, our office received a claim submitted by an attorney in the Palm Harbor area against an insurance company for a sinkhole claim. The attorney was on top of his client, quickly explaining the issue to the insurer. Over the next two months, the insurer wrote letter after letter asking for not only the same information over and over, but the same information for entirely new issues that had nothing to do with the claim. The client, the attorney, and even the insurer just could not understand why so much information was needed for a minimally complex case. It simply did not add up.
The claim was delayed more than 120 days simply because the insurance company wanted to play dumb. They stalled repeatedly, claiming they did not receive important documents, acting like they couldn’t find information in their droid program. In reality, the insurance company was just delaying their obligations to pay out the claim. This type of behavior from an insurance company is unethical. It violates statutes and show a bad faith attempt to ruin a claim.
It may be hard to determine whether your claim is being delayed for a legitimate reason or just to procrastinate. Many insurance companies adopt a ‘let’s wait and see’ approach to claims handling. They wait and see if you will either lose interest or simply drop the claim as time goes on. Don’t let this happen to you!
Legal Rights of the Insured
Policyholders have legal rights that require the insurance company to handle an insurance claim in a certain way.
The law generally recognizes the right to receive insurance benefits as quickly as possible after a claim has been made. The wording and intent of insurance contracts are relevant to the policyholder’s rights and entitlements, including the insurer’s duty to act in good faith. Courts have held that no person should be made to suffer unnecessary delay in recouping damages for which a person is legally liable, and the insurance company is required to pay interest to the policyholder under most circumstances.
In Badahman v. Commerce West Insurance Company, 221 Cal.App.4th 1458, 164 Cal.Rptr.3d 725 (2013), Badahman was injured in an auto accident and was treated at a hospital. She submitted a claim to Commerce West Insurance Company (CW) seeking payment for her medical bills which were outstanding after she received benefits as an insured under her father’s auto liability policy with CW. After receiving Badahman’s claim letter, CW sent a letter to Badahman requesting that she submit documents showing her MassHealth (Massachusetts taxpayers’) coverage of her medical bills. Badahman submitted the required documents within 10 days as requested. Eight months later, CW issued a check to the hospital in payment of Badahman’s medical bills. More than two years later Badahman brought a lawsuit against the insurance company because of the delay in the payment of medical bills. The trial court denied defendant insurance company’s motion for summary judgment and granted plaintiffs’ request for a summary judgement. The Massachusetts Appeals Court ruled that insurance companies have a duty to pay policyholders as quickly as possible under G.L. c.93A. The Appeals Court stated: An insurance company breaches its duty to pay in violation of G.L. c.93A when it "refuses, without reasonable cause or actual knowledge, to provide a reasonable explanation of the basis for its claims disallowance." We conclude that, as a matter of law, when an insurer does so, it is not acting in good faith, and therefore it cannot have a very good faith defense for the disallowance.
The Appeals Court stated that Insurance companies have obligations when adjusting an insurance claim. The insurer has a duty to act in good faith and cannot delay payment of the policyholder’s claim for more than a reasonable period of time. Insurance Companies cannot have a very good defense if they violate the law.
When to Sue Your Insurance Provider
With the exception of certain life and health insurance policies, paying a claim on time is one of the most basic policy obligations of an insurance company. Even so, insurance companies do not always pay promptly and, in some cases, do not pay at all. If you have never seen your claim paid and you have tried and failed to get the insurance company to pay it, you may wonder whether you have any grounds for suing the insurance company yourself.
There are four principal grounds for suing an insurance company. They are: bad faith, breach of contract; negligence and fraud. In a few types of cases, an insurance company may be sued on the ground of fraud, but most cases are brought on the other three grounds.
"Bad Faith" is an allegation that an insurance company has acted in violation of its legal duties to you. This allegation may be made against an insurance company when its refusal to pay is based on an improper interpretation of a policy provision. An allegation of bad faith against an insurer may also be based on the delay or failure to pay an insurance policy benefit. Bad faith is a demand against an insurance company that seeks a penalty that may be collected in addition to the policy benefits due under the policy. Damages for bad faith may be claimed when the insurance company: (1) refuses to pay; (2) intentionally causes delay; (3) refuses to provide an explanation to the insured; (4) makes an offer not in good faith; or (5) fails to pay within a reasonable time. Occasionally, a third party may bring a bad faith claim against an insurance company which insures a person or business that the third party believes to be liable for damages to him.
What to Do Before You File a Lawsuit
Step #1: Documenting the delay in payment of your claim by the insurance company
As with all insurance disputes, begin carefully documenting the delay from your insurance company in payment on your claim. Your documentation should include dates and times of each and every communication with your insurance company. As we explained in previous entries, not all communications with an insurer have to be documented, but you will want to keep a running timeline of all the conversations you have with your insurance company regarding payment on your claim. The sooner after your insurance company’s first delay in payment that you start keeping this documentation, the better.
Step #2: Communicating with the insurer about their delay in payment
In general, it is a good practice to communicate with your insurance company at least once a week about its delay in payment. Depending on what the last communication was between you and your insurance company, you will want to gently remind your insurance company of its obligations under the insurance contract. For example, if your insurance company was required to pay you after a certain event, but has delayed paying you because it is waiting for something else to happen, remind your insurance company that that event has already occurred, and your insurer should have already paid you.
Step #3: Mediation or arbitration
Sometimes the cheapest and quickest route towards resolving a dispute with your insurance company is to go through an alternative dispute resolution process, known as either mediation or arbitration. These two processes are basically a way of telling your insurance company that it should pay your claim or else. In other words, alternative dispute resolution provides incentives to your insurance company to settle your claim instead of going to court (also called litigation). However, neither mediation nor arbitration is compulsory, so you will have to decide whether or not to request that your insurer take part in one of these forums.
Speak with an Attorney
Given the complexities involved in the decision about whether or not to sue an insurance company, it is generally recommended that policyholders consult with an expert or attorney in the field who has dealt with claims previously and who can help determine whether legal action is appropriate and feasible. An experienced lawyer can not only decide whether a lawsuit is a viable course of action for the insured , but can also help navigate the process so that the greatest possible chances of recovering lost payment and compensation are obtained. Consulting an expert can help the policyholder to not only make the decision about whether to bring legal action, but provide them with any needed support throughout the process and hopefully provide clarity to an otherwise stressful and complicated situation.
Possible Outcome and Payout
Possible outcomes of suing an insurance company for delayed payment: compensation types
After deciding to pursue litigation, policyholders will likely achieve one of three possible outcomes. First is an outcome like the one we just mentioned with the Kaufman case, which was settlement of the lawsuit in the form of dismissed charges and/or a reimbursement of attorney’s fees. This allows the policyholder to avoid the time and cost of litigation.
The second possible outcome is a favorable outcome for the policyholder. They may be awarded the full amount of what they’re seeking from the insurer in court, including damages and attorney’s fees. Let’s say the amount owed is $150,000. If the insurer fails to pay this amount, not only might the policyholder recover that amount, but may also recover additional damages for bad faith on the part of the insurer. On top of this, they may also recover what they paid their attorney. All of these factors may bring the total sum owed to six and seven figures.
The third possible outcome of litigation is an unfavorable one for the policyholder. They may lose the case entirely or just be awarded a lesser amount than they sought. Insurers fight hard with their lawyers, and it’s always possible they’ll come out on top. The best way to prepare for this situation is to seek advice from a qualified lawyer with extensive experience handling insurance claims.
As you can see, policyholders benefit from knowing the possible outcomes of their case. The outcomes are summarized above for the reader’s ease of use. But make no mistake — they are only a small part of the big picture.
Avoiding Insurance Delays
One way to minimize the risk of future delays and frustration with claim payments is to be proactive with your claim paperwork. Make sure you send in all the documentation required by the policy, including photographs, estimates, study and survey reports, and more, right away. By being thorough and submitting a complete claim, the insurance company will have no excuse to delay payment. Even after this, however, you must be vigilant. Be independent in your research , and thoroughly understand your insurance policy and the claims process in order to stand your ground when dealing with the insurance company. Also, maintain contact with the insurer, and follow up on your claim to make sure that the insurance company is paying on time. If you find your insurer is attempting to stall or delay for any reason, it is best to contact an experienced insurance claim attorney to get your claim paid.