How to Sue Your Insurance Company

Co-authored by Clinton M. Sandvick, JD, PhD

Last Updated: March 26, 2023 References Approved

Sometimes insurance companies do not act in the most upstanding manner. If you have an insurance policy in place, an event happens giving rise to a claim on that policy, and the insurance company does not act as it is supposed to (by denying your claim, delaying payment, paying you less than you are owed, etc.), you may have to resort to litigation to get the money you deserve. Understanding on what grounds you can sue, and the process for bringing the suit itself will help you if you find yourself in this frustrating situation.

Part 1

Part 1 of 3:

Understanding When You Can Sue Your Insurance Company

1
Sue your insurance company if it unreasonably delays payment of your claim. Insurance companies are in the business of making money. The longer an insurance company takes to pay a claim, (1) the longer it can hold on to the money it owes you and use that money for its own purposes and (2) you might find yourself in a position where you really need the money and therefore become willing to settle for less than the amount they should have paid you. Insurance companies are obligated to pay valid insurance claims in a timely manner.^{[1]
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Research source} If your insurance company has unreasonably delayed payment of your claim, you can sue it in order to force it to pay the amount it owes you.
- Make sure to ask your insurance company for the reason it is delaying payment of your claim, and ask them to put this reason into writing and send it to you. You will need this as evidence later on.
2
Sue your insurance company if it tries to settle your claim for an unreasonably low amount of money. Once you make a claim, you and your insurance company will engage in a negotiation process, where the insurance company tries to talk you down from the amount you request to cover your losses.^{[2]
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Research source} While you may be able to reach an amount both of you agree on, sometimes your insurance company will refuse to offer you anything but a small amount of money (i.e., not enough to cover your loss) and hope that you will take it instead of trying to fight the company over the amount. If this is the case, you can sue the insurance company because it is unwilling to cover your losses in a reasonable manner.
- Make sure to ask your claims adjuster for the reason the insurance company is only willing to pay you such a low amount, and get this reason in writing. You will need this later.
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3
Sue your insurance company if it unreasonably denies your claim. There are many tactics your insurance company might use in order to not pay your claim, and many reasons it might give you for denying payment. It might say that it was your fault you suffered a loss, that your particular policy doesn't cover the exact circumstances of your loss, that you didn't do enough to prevent the loss, or simply that your claim is too high. Regardless of the reason it gives you, if you feel that the reason it is denying your claim doesn't seem fair or that it is not rational, you can sue your insurance company for denying your claim without a good justification for doing so.
- Make sure to have your insurance company give you the reason it is denying your claim in writing so you will have this for reference later on.
4
Sue your insurance company for post-claim underwriting. Before an insurance company issues you a policy, it engages in a process called "underwriting," by which it investigates you and your history to determine if it should offer you an insurance policy. Sometimes, insurance companies will refuse to pay your claim on the basis that your policy should never have been issued in the first place because you were too great a risk to insure, basically trying to underwrite you again after you suffer a loss (making you a greater risk to the insurance company) in order to avoid having to pay you.^{[3]
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Research source} It will then try to cancel your policy, and use this as a basis for not paying an otherwise covered claim. If your insurance company does this, you can sue them because this type of behavior is not legitimate.
- To recognize this type of behavior, check to see which part of the insurance company is processing your claim—the claims department or the underwriting department.^{[4]
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  Research source} If it is the latter, be on the lookout for your insurance company taking this type of action against you.
- If your insurance company issues you a check refunding your premium payments because they are canceling your insurance, do not cash this check.^{[5]
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  Research source} Doing so may be seen as accepting the insurance company's decision to cancel your insurance in light of a claim it does not want to pay.
5
Sue your insurance company for failing to defend you in court. In the liability portion of your insurance policy, your insurance company protects you from certain damages sought in lawsuits against you. This promise is often referred to as an insurance company's duty to defend. When an insurance company has a duty to defend, they will be required to hire legal counsel to represent you in covered claims. It also includes a promise to cover all legal fees and costs. If the damages being sought are at all covered by your insurance policy, your insurance company will have this duty to defend.
- If your insurance company fails to defend you when they were supposed to, you may sue for "bad faith" and recoup the costs of defending yourself. These costs could include attorneys fees for both defending yourself and suing the insurance company.^{[6]
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  Trustworthy Source
  American Bar Association
  Leading professional organization of lawyers and law students
  Go to source}
6
Understand your causes of action against your insurance company generally. In law, the "cause of action" is the formal way of stating that you have the right to file a lawsuit in light of a particular series of events. In relation to insurance companies, you will generally be bringing a lawsuit under one of three causes of action: (1) breach of contract; (2) violation of a consumer-protection law; or (3) a violation of "bad faith" law.^{[7]
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Research source} The above are examples of "bad faith" on the part of your insurance company, which basically means that it did something wrong without any good reason for doing so. If your insurance company has engaged in any of these activities, this is the legal reason you will point to for bringing your lawsuit against your insurance company. The majority of lawsuits against insurance companies are for these types of "bad faith" violations.
- Many of the above activities could also be considered a breach of contract, meaning your insurance company has violated the terms of the insurance policy it offered you and on which you have been paying premiums.
- These activities may also be considered a violation of federal or state consumer-protection law, which prevents businesses from engaging in unfair or deceptive business practices, or from making fraudulent statements.^{[8]
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  Research source} These laws vary by state but, generally, if your insurance company has made false statements to justify any of its actions, you can bring your lawsuit on this ground as well.

Part 2

Part 2 of 3:

Suing Your Insurance Company

1
Contact your insurance company. Your first step should always be to contact your insurance company to try to resolve your dispute before threatening litigation. Contact your insurance company and talk with your insurance agent to see if you can work the issue out on your own. If your particular insurance agent or claims adjuster is unhelpful, ask to speak to their supervisor.
- Ask why your claim was denied, and get the reason in writing. You will need this as evidence later if you intend to sue your insurance company.
2
Obtain a copy of your signed insurance policy. You should have a copy of the insurance policy in question filed in your records with your other important documents. If you do not have a copy, or have somehow misplaced or lost it, contact your insurance provider and request a copy of your insurance policy.
3
Read your insurance policy thoroughly. This is very important. If you will be suing your insurance company because they violated the terms of your policy, it is crucial that you understand exactly what your policy says. Pay particular attention to things like the proper process for submitting a claim, how payment is handled, and how disputes are resolved according the contract.
- Make sure you have complied with your contractual obligations. If you will be asserting that your insurance company has failed to follow through with its contractual duties, you will want to be sure that they cannot make the same claim against you. If your policy states the process by which you must submit a claim, for example, follow this process exactly.
4
Make sure your loss is covered under the terms of the contract. Insurance contracts are generally very specific about what is and is not covered. As you are reading through your policy, check to see if the facts surrounding your loss match with the types of loss your insurance company has contractually agreed to cover in your policy.
5
Compile an estimate of your losses. Depending on the type of insurance you are dealing with, you will want to make sure that you have evidence substantiating your claim. Acquire the necessary records, bills, receipts, or photographs you will need to show you have a valid claim.
- If you have spoken with your insurance company about your claim, collect the records of these conversations (written correspondence, e-mails, etc.) so that you will be able to show you have taken steps to resolve your claim before resorting to litigation.
6
Research the insurance law of your state. Insurance law varies widely state to state, and you will want to be sure that you are aware of what your state's laws say in relation to insurance claims before engaging in litigation. There are many resources online dedicated to helping you understand the insurance laws of your state of residence.^{[9]
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Trustworthy Source
National Association of Insurance Commissioners
Regulatory support organization responsible for setting standards for insurance commissions in the United States.
Go to source}^{[10]
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Research source}^{[11]
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Research source} Read your state's laws thoroughly to get an understanding of the laws that will govern your lawsuit.
7
File a claim with your state's department of insurance. Every state has a department dedicated to assisting consumers with regards to insurance claims, and each has a website you can visit for more information, or to file a complaint online. After filing your claim, you will need to provide whatever documents or evidence your state's insurance department may ask for.
- The website for your state's department of insurance will also contain resources to help you understand your state's insurance law.
- You should be aware that most state's insurance departments receive many claims each day, and therefore you may have to wait a considerable amount of time before your dispute is finally resolved. If you want quicker results, consider hiring an attorney.
- If you do hire an attorney, some states' insurance departments will wait until your attorney has litigated your case before intervening.^{[12]
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Part 3

Part 3 of 3:

Taking Your Insurance Company to Court

1
Hire an attorney. Insurance law is very complicated, and you might not have the easiest time researching and understanding it on your own. You also might be too busy to sit down for hours to read through long lists of statutes. While your state's department of insurance will certainly help you, the fastest way to get your claim resolved is to hire a local attorney specializing in insurance law.^{[13]
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- Attorneys often accept insurance cases on a contingency-fee basis, meaning they will take a portion of the money you are awarded if you win as payment instead of you paying them up front.^{[14]
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  Research source} You will be charged nothing if you lose your case.
- The attorney will also be able to sit down with you and discuss the issues of your particular case to determine the best way to handle your denied claim. Many attorneys offer free consultation, so don't be afraid to take advantage of this and talk through the facts of your case with someone who specializes in your state's insurance laws.
- Your attorney will take care of the lawsuit as it progresses, and will contact you as needed for more information.
2
File a complaint with the appropriate court. The first step of any lawsuit is filing a complaint with the appropriate court. Since insurance law is based mostly on state law, it is likely you will be in the state trial court for the county in which you live. Your attorney will submit a document to the court stating your case in broad terms—the basic facts surrounding the dispute, and your cause of action for bringing the lawsuit (which will probably be "bad faith" on the part of the insurance company).
- Your insurance company will file an answer to this complaint, and your attorney will receive a copy. From this document, you will be able to get a general idea of what your insurance company's position is.
3
Engage in discovery. After your complaint is filed, and the insurance company has responded, the process known as discovery will begin. Basically, this process (which happens before trial) allows each side to get a sense of the strengths and weaknesses of each side's case to determine if the case should be settled, or if it would be better to go to trial and argue in front of a judge and jury.
- This is where your written correspondence with the insurance company will come in handy. If you don't have certain information about your case that you think the insurance company has in its records, this is the time to ask for this information.
- The insurance company will also ask you for certain records and documents, which you must produce.
- During this process, the insurance company might depose you, which means that it meets with you and your lawyer in an official setting to ask you questions pertaining to your case.
- Most cases are settled in this stage. If you have a valid claim, and your insurance company sees that you are willing to take legal action to protect your interests, it will likely offer to settle your case with you to save itself the expense of trial.
4
Participate in the pre-trial conference. If the discovery process has concluded and no settlement has been reached, you, your lawyer, the insurance company, and its lawyers will all meet before a judge to discuss certain issues before the trial begins that will speed up the trial process going forward. These will be things like the rules for admitting certain types of evidence, which issues the parties agree upon, and the like.
5
Go to trial. On the day your case is set for trial, you, your attorney, your insurance company, and its attorneys will appear in court to argue your case. Your attorney will present the facts of your case against the insurance company, and the insurance company will try to argue why it has not broken the law. You will probably be called on to testify at trial, so be sure to be consistent with the facts of your case, tell the truth, and remain calm and relaxed. Going to trial can be a stressful process, but if you have a valid claim and the documentation to back it up, you will likely receive a verdict in your favor.

Warnings

If you are contacted by your insurance company's attorney, don't speak with him or her without speaking to your own lawyer first. Alternatively, simply tell them to speak with your lawyer about any issues relating to your case.

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Insurance litigation is often a slow and highly adversarial process, sometimes taking years to reach a final result. You will need to be prepared to be patient as this process unfolds. Threatening your insurance company with litigation will usually result in the company ceasing to talk with you, so make sure to try to work it out in a non-confrontational manner before you resort to pursuing legal action.

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Be careful with what you say to your insurance agent or claims adjuster. The insurance company will often try to find evidence against you or have you admit fault of some kind to downsize the value of your case or hurt your legal position in some way. Don't compromise on your valid position in any way.

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This article, while informative, does not constitute legal advice. It is always best to talk over your case with an attorney licensed in your jurisdiction before commencing any sort of legal action.

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Don't take the insurance company's offer right away if it is less than what you feel you deserve. If you choose to take the initial offer, it is unlikely that you will be able to reopen the case to seek the full value of the claim later on.^{[18]
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