Your insurance company may have finally agreed to a settlement amount and sent you a payment if someone else filed a claim against your insurance company because you caused the accident. Then, you got a certified letter telling you that the other person is going to sue you for even more money. You might wonder if the other driver’s words have any weight and if the courts will really let someone sue over a claim that has already been settled. The answer depends.
If you’ve been in a car accident or other incident where insurance gets involved, you may be wondering – can an insurance company sue me? The short answer is yes, there are some scenarios where an insurer can initiate legal action against their policyholder. However, there are also protections in place for consumers when it comes to insurance lawsuits. In this comprehensive guide, we’ll break down when and why an insurance provider may sue, how to protect yourself, and what to do if you find yourself on the receiving end of a lawsuit.
When Can An Insurance Company Sue Their Policyholder?
Although rare, there are some specific situations where an insurance company may decide to take legal action against their insured These usually relate to disputes around the insurer’s contractual duty to provide coverage based on the insurance policy. The main scenarios include
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Subrogation Claim – If the insurance company pays out damages to their own policyholder after an accident, they may sue the at-fault party to recover those costs This is known as a subrogation claim
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Coverage Denial – If the insurance company denies a claim due to alleged misrepresentations on the application or policy breach, they may sue for reimbursement of any benefits paid.
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Premium Non-Payment – Failure to pay policy premiums can prompt the insurer to sue for the outstanding amount owed
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Declaratory Relief Action – The insurance company may file this lawsuit to clarify whether a specific claim or type of loss should be covered under the policy terms.
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Fraud – Any attempt to intentionally deceive or misrepresent details to obtain unwarranted insurance benefits may lead to civil or criminal charges.
So in most cases, the insurance company would be using the courts to settle a contractual dispute or recover costs related to your policy. Personal injury lawsuits involving negligence or liability disputes would typically come directly from the other parties, not the insurer itself.
Limits On Insurance Company Lawsuits
Although insurers can technically sue policyholders in certain situations, there are restrictions in place to protect consumers. Two key limitations include:
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Contractual Obligation – The insurance company must act in good faith and abide by the terms outlined in the policy contract. They cannot pursue legal action arbitrarily.
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State Insurance Regulations – States often have laws and regulations prohibiting unfair claims handling practices. This provides oversight on insurer lawsuits.
Reputable insurance companies will also make every effort to settle disputes through internal appeals or mediation before resorting to lawsuits. Documenting all communication and upholding your own policy obligations will be key to protecting yourself if a legal dispute arises.
What To Do If Your Insurance Provider Sues You
If you receive notice you are being sued by your insurance company, remain calm but take swift action. Here are some steps to consider:
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Notify Your Insurer – If this is related to a specific claim denial, appeal the decision through proper policy channels first. Provide any evidence or information that may resolve the issue.
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Review Your Policy – Examine your policy documents and communications related to the lawsuit issue. This can help reveal the insurer’s justification and determine next steps.
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Contact An Attorney – An experienced insurance lawyer can advise whether the lawsuit has merit or may be considered bad faith. They can also represent you in legal proceedings.
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Comply With Court Orders – If the lawsuit moves forward, be sure to follow all court instructions, deadlines, and protocols required to avoid additional complications.
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Explore Settlement Options – Your attorney may be able to negotiate an out-of-court settlement with the insurer that avoids prolonged litigation.
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Protect Your Assets – Depending on your policy and state laws, you may or may not be personally liable beyond insurance limits. But consult a legal or financial expert on asset protection strategies.
With the right preparation and support, an insurance company lawsuit does not have to be the scary ordeal it may initially seem. Understand your rights, review the insurer’s claims thoroughly, and seek qualified legal counsel.
Key Takeaways: Can My Insurance Company Sue Me?
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Insurance providers may sue policyholders primarily for subrogation claims, coverage denials, lack of premium payment, or suspected fraud.
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Consumer protections in insurance contracts and regulations restrict insurers’ ability to arbitrarily take legal action.
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If sued, notify your insurer, evaluate the claim details, hire an attorney, and explore settlement options.
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With proper documentation and legal support, policyholders can often resolve insurance lawsuits efficiently.
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While daunting, an insurance company lawsuit does not mean you will absolutely lose the case or owe substantial damages.
If an insurance company lawsuit arises, it is wise to consult qualified legal counsel to represent your interests. But policyholders have ample protections against predatory or unjustified legal action by insurers. With the right preparation, insurance policyholders can efficiently address any claim disputes that escalate to litigation.
Agreeing to a Settlement Via Fraud or Coercion
Most likely, the courts will let the other person sue you for more money after your insurance company pays them, as long as they can prove fraud or coercion. If you, say, pay someone who was hurt to agree to a settlement and then break your promise, that’s fraud or coercion. Some courts may also charge you with fraud or coercion if you use threats to get the other person to agree to a low settlement.
Of course, the other party cannot just say that you committed fraud or coercion. He or she will have to prove it, which may be difficult without documentation. It’s not likely that things will go your way, though, if the other person has text messages or emails from you that are clearly threatening or a check from you that didn’t clear when it was tried to be cashed. When this happens, the courts might let the other person sue you for more money, and you might also be charged with a crime.
You Are an Additional At-Fault Party
It is common for the person who was hurt in a car accident where more than one person was at fault to file claims with each person’s insurance company at the same time. This ensures that one party does not overpay for a mutual mistake.
This does happen, though. Sometimes, the victim doesn’t find out about the third party’s role until months or even years later, after agreeing to a settlement with one insurance company. In your case, if this happens, the person who was hurt can ask for money from you or your insurance company.
The third most common reason people who were hurt file lawsuits after agreeing to a settlement offer is that the other party’s insurance coverage ran out. If your insurance company negotiates and makes you an offer, but then finds out that you haven’t been paying your monthly premiums, it won’t pay you. If it sends a payment and then finds out that you didn’t pay the monthly premium, it can ask you to pay it back. More than that, the person who was hurt can sue you for damages because you don’t have insurance.
What To Expect When You Sue An Insurance Company
FAQ
Can someone sue you after insurance pays in California?
Can someone sue you after insurance pays Florida?
Why do people sue insurance companies?
Can someone sue you after insurance pays in Texas?
Can insurance companies be sued?
Breach of contract: The most common legal theory that insurance companies are sued upon is a breach of contract theory. An insured may sue their insurance company if the company fails to follow the terms of the insurance policy. Find My Lawyer Now! How Long Does it Typically Take to Sue an Insurance Company?
Can I sue a car insurance company?
If an individual exhausts their appeals through the company, they may be able to file a car insurance company lawsuit through their local court. In order to bring this type of lawsuit, however, an individual will need to have certain evidence to give their claim the best chance possible to succeed.
Can I sue an insurance company without an attorney?
Without an experienced attorney you can expect the process of suing an insurance company to be long and difficult. The insurance company will want to delay paying your claim, especially if they have grounds for denying the claim. However, insurance companies are required by law to timely pay out a properly filed insurance claim.
Should I file a lawsuit against my insurance company?
Although not a requirement for filing a lawsuit against your insurance company, an experienced insurance attorney may be in your best interests, in order to make sure that your claim is taken seriously and that you receive the best remedy for your situation.