This may be one of the more complicated questions a personal injury lawyer can answer because there are so many factors to consider. Plus, the rules vary widely from one state to another. In general, an insurance company is not required to pay anything more than its policy limit. There are, of course, exceptions.
At Heninger Garrison Davis, LLC, our main focus is to clearly and effectively advise and assist each of our clients to the fullest. This means providing straightforward communications, one-on-one consultations, and a clear path to your goals. Give us a call if you have suffered an injury and need help.
What is Insurance?
To understand your rights under an insurance policy, it is important to fully understand what insurance is. A person or business purchases a certain amount of insurance coverage in the event the person or business harms someone else. It is paid protection. If you hurt someone, your insurance company has a contractual duty to hire lawyers, defend you in court, and pay any judgments against you, up to the limits of coverage that you purchased. Your insurance company has no duties or obligations to the people you hurt.
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What Happens if There is Not Enough Insurance?
Whether it is an injured party or an insured party, sometimes the insurance policy is not enough. Say, for instance, you are injured by a drunk driver who carried a small $25,000 policy. But you suffered broken bones and incurred over $50,000 in medical bills. Your injury could be worth far more than the insurance that the drunk driver purchased.
In this situation, if you were to get a judgment against the driver for more than $100,000, the insurance company would be obligated to pay $25,000, and you would have to try to collect the difference from the drunk driver individually. If that person has no financial means to pay, then you could be left undercompensated for your injuries.
Duty to Act in Good Faith
In the example above, the insurance company would be wise to pay the full value of its policy. This is because it has a duty to deal fairly with injured parties and with their own insured. If the insurance company refuses to pay or is unreasonable in handling the claim, they could expose their own insured person to a lawsuit or an excess judgment. This obligation is known as “good faith.” When insurance companies intentionally delay, use unlawful tactics, or refuse to pay a reasonable sum of money to settle a claim, thereby leaving their own insured party exposed to a judgment, they are said to be acting in “bad faith.” Some states even provide a statutory remedy for going after an insurance company that acts in bad faith.
What is a Bad Faith Lawsuit?
Imagine that you paid your insurance premiums for years and one day you do something stupid and drive while a little intoxicated. You cause an auto accident and seriously injure someone. Your insurance company refuses to resolve the claim fairly, and the injured person sues you. They obtain a sizeable judgment against you, garnish your wages, put a lien on your home, and place you in financial ruin. Now imagine that the injured party had offered to settle the case for the amount of insurance that you had available, but your insurance company took an unreasonable gamble with your future.
This is exactly how insurance companies breach their contractual duties to their clients every day, leaving people exposed even after they pay their premiums year after year.
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How to Collect Money for Bad Faith
There are a couple ways this can happen. First, if you are the negligent insured party against whom the insurance company has committed bad faith, you can sue your insurance company for bad faith and breach of contract. This may help you recover compensation for the harm that was caused by the insurance company refusing to honor its obligations.
On the other hand, if you are the injured person who can not collect because of an insurance company’s bad faith, you may be able to get the negligent party to file the lawsuit then “assign” it to you. This just means they agree to give you the money from the bad faith lawsuit in exchange for you not suing them. This allows you to bypass the negligent driver and pursue compensation from the insurance company. By doing this, sometimes there is actually a way to collect more compensation than the value of the insurance policy.
How We Help
At Heninger Garrison Davis, LLC, we can help to review the insurance company’s practices to see if they have committed bad faith. These actions are somewhat rare, but when successful, you could obtain sizeable compensation. Never assume that an insurance company knows what it is doing or is acting within the law. Many times they are not. Call us today to schedule a private free consultation to review your options.