The average U.S. citizen spends thousands of dollars on insurance each year. Because most people never have to suffer the large losses or tragic injuries that we all worry about, people typically have very little experience in working with insurance companies on large claims. Individuals that are faced with dealing with insurance companies on their claims, are in for a big shock. Delaying compensation, the use of complex policy language in denying claims, and substantial underestimates of injuries or losses are common to insurance carriers.
Many individuals do not realize that insurance companies, just like banks, make their profits from investments, bonds, stocks, real estate, and even venture capital. Ultimately, how profitable a company is depends on how much money they have available to invest. So, if an insurance company owes XYZ to all Claimants (insured individuals seeking compensation) at a certain point in time, it can save around 10% of that money each year in investment profits simply by delaying claims. The insurance company can similarly save another 30% by low-balling its claimants, underestimating and undervaluing its own loyal subscribers. Potentially, another 20+% can be saved by unjust wrongful claim denials, that are often misinterpreted due to confusing policy language.
Whether or not an insured will be reimbursed for their legitimate claim at all depends largely on their own knowledge of insurance consumer rights and responsibilities. The policyholders are oftentimes at the mercy of their insurance company, as they write the policy, interpret the policy, evaluate the claim, and control the purse strings.
Basically, the insured is really at a substantial disadvantage to the insurance company. Fortunately, though, there are ways to begin to level this playing field. In order to to do this, you must make yourself familiar with important principles of insurance law, which legislators and judges have crafted throughout time to protect the average claimant.
Here are five of said principles:
1. Insurance companies must act in good faith as they interpret their policies, investigate claims, and pay their insured.
It is unlawful for an insurance company to:
- Engage in unreasonable and unnecessary delay; to underpay claims; or to place their own financial interests ahead of the financial interests of the insured.
- Use tricky, deceptive tactics in sales or claims handling.
- Force an insured to hire a lawyer in order to be compensated justly.
- Mistreat a policyholder.
A violation of any of the above stated standards is a violation of the required duty of good faith that the law imposes on insurance companies. This unlawful violation would expose the insurer to potentially significant fines and damages.
2. If an insurance company is unreasonable in denying a claim, you must sue them in order to recover your policy benefits, and the insurer must pay for your legal costs and attorney’s fees.
If the costs and attorney’s fees were not available, the policyholder could not be fully reimbursed; and the insurer would be able to under-settle all claims just by arguing that they are willing to settle the uninsured’s net on the actual claim values, after paying legal fees. If an insurance company representative tries to make this confusing argument to you in an attempt to underpay, thank them in advance. They are basically offering to pay for you to hire an attorney to seek more compensation.
3. If an insurance adjuster misrepresents or misquotes the coverage provided at the time of your incident, the insurance company must honor the false coverage representations made by their agent.
Insurance agents are typically very kind, which is exactly why they sell on you policies. The same is true for claims adjusters. Otherwise, they wouldn’t be able to settle any of their claims. It is important to take a step back, and distinguish these nice people apart from the company itself. The true purpose of an insurance company is not to be kind, but to make lots of money for its stockholders. Obviously, if the insurance company makes more money than expected, the stock rises, but if it makes less money, the stock goes down. The purpose of an insurance company is not to be nice, but to make money for its stockholders. If it makes more money than expected, the stock goes up. If it makes less money than expected, the stock goes down. When stock prices rise, executives are given large bonuses and pay raises, but when the stock goes down, they face serious consequences. So, the insurance companies are simply concerned with profits. When agents and claims adjusters are trained, they aren’t trained to be rude. That type of behavior would not help to increase profits. Similarly, insurance agents aren’t taught (hopefully) to misrepresent coverage, and to low-ball all claims. They are typically just told very little about the actual policies they are selling; they may know what is covered, but probably know very little about what is not covered.
You could probably spend a lifetime talking to insurance agents about policies they are selling, only to find that there is undoubtedly a single agent who could pull out a policy and explain it in entirety. Agents simply don’t really understand the policies they are selling. They are just salesmen. In fact, you probably won’t get to see a copy of your policy until weeks after the purchase, when it is mailed to you directly from the company. So, all you have to go off of is the agent’s initial sales pitch.
4. If the amount of your coverage does not sufficiently cover your actual loss because the insurance agent recommended that you insure for less than the amount you needed, the insurer may be responsible for paying for your entire loss, and not just your stated policy benefits.
A good example of this principle, is when you are being sold insurance. Oftentimes, and individual will ask the agent the policy limits before signing on the dotted line. The agent, in an effort to give you the lowest possible bid to beat out competition, will under-insure to lower the premium.
This is a great reason to take notes when you buy your policy, and to keep these notes in an insurance file. If the policy limits were recommended by the insurance agent, and they are insufficient, you are entitled to be paid for all losses on the basis of what your limits should have been. Insurance agents do not have any real grounds on which to make suggestions for your particular policy.
5. Any and all policy ambiguity must be interpreted in your favor and against the insurance company.
Every single insurance company has a department full of smart, sneaky individuals, set on beating out the competition by writing the most incomprehensible and loop-hole filled stipulations you can find. Insurance policies are typically worded with obtuse, ambiguous, self-canceling phrases.
These policies are so hard to comprehend because insruance companies know that the less clear their policy is, the less clear their obligation to pay is. So, they write policies that confuse the average citizen, because they always have their financial interests in mind.
It is possible to turn this confusion into an advantage just by showing that an applicable provision or stipulation is ambiguous. If it is, coverage must be rewritten and provided, and the claim must be paid.
As accident attorneys, rigorously trained and experienced in aggressive insurance claim representation, we suggest that before you attempt to settle with an insurance company, you call us for a FREE, NO OBLIGATION case evaluation. Before consulting with a company who is completely willing to low-ball, delay, and confuse you, please talk to an attorney to evaluate the worth of your case, the language in your policy, and the risks of settling on your own. We look forward to speaking with you today; give our St. Louis car accident lawyers a call at 314.409.7060, or toll free at 855.40.CRASH.