What is Considered False Information from an Insurer
False information provided by an insurance company may include incorrect information about policy coverage, the number of vehicles covered under a policy, the number of people designated on a policy, or any other false information that is significant to the loss for which the policy was written. The false information may be expressed by a company representative, in a settlement offer, or in correspondence. The false information may have caused you, the claimant, to act detrimental to your interest.
For example, an agent renews a business owner’s general liability policy with the same company. Upon re-issuing the renewal, the agent makes changes to the renewal policy, which the company does not know of before it renews the policy . A claim arises during the renewal period. The company, relying upon the information it received when the policy was renewed, denies coverage for the claim. The insured held a different business classification at the time the claim arose; the change made by the agent caused it. The company should have known of the change to the business classification and should have re-evaluated its risk accordingly. But the company still asserts that its agent was not its agent, making the argument that it can rely completely upon the agent without ever needing to solve the conflict between itself and the agent. You may be able to sue the company and/or the agent, based on the circumstances.
The Grounds for a Lawsuit
When an individual feels they have received false or misleading information from an insurance company, this statement may form the grounds for a lawsuit. If the insured has reasonably relied upon the falsehood, and the insurer has misled them, the insured has been harmed by a violation of the law. So what do misrepresentation, fraud and breach of contract have in common; they all fall under the general umbrella of falsity.
Misrepresentation occurs when the insurer knowingly provides false information that the insured relies upon in making a decision. Although it is easy to dismiss some of the technical aspects that define a "misrepresentation" as obscure and unimportant, it is worth being aware of these distinctions so that one does not carelessly cross the threshold from mere discussion of terms into the realm of making a false one.
In other words, if the insurer makes an error, even a major one, but "genuinely believes that the information sent in the communication is true," there is no misrepresentation because the insurer is not attempting to deceive the insured. If the insurer merely provides a legal interpretation for the contract that turns out to be incorrect, it is not a misrepresentation either, for it is not trying to intentionally misapply the law.
However, once the insurer "knows" that it has made an error, it is alert to the fact that it has provided false information or is about to provide false information, and it either fails to correct the error or provides a legal interpretation that it knows to be erroneous, the insurer is guilty of misrepresentation. The law is strict with insurers on this point, and they can be held liable for misrepresenting the law, even though the precise legal interpretation is usually a very complex matter open to debate.
At the same time the insured is seeking justice in the form of truth from the insurer, the insured too must be aboveboard with the insurer. While they may still win damages on even a "spurious" claim, they are unlikely to be able to recover on a fraudulent or dishonest claim, as discussed above.
The Importance of Evidence in Your Case
Evidence is crucial in proving your case against an insurance company. An insurance company has access to an enormous amount of evidence: records from their own office regarding the claim, documents and records from your medical providers, video surveillance evidence, images from social media, and much more. They will spend considerable amounts on attorneys and expert witnesses to try to prove their good faith in investigations and they will use these records against you in order to deny your claim. It is essential in a situation like this to have strong evidence in your favor, be it in the form of documentation, records of communication, or expert testimony. Having the right evidence supporting your claim is key to achieving your goal in a lawsuit against an insurer. The burden is on you, the Plaintiff, to provide that evidence in order to win. Your attorneys will work tirelessly to make sure that you manage to do just that.
Steps to Take Before Suing the Insurance Company
Before considering that course of action, the policyholder should pursue their grievance regarding a false insurance company statement. One step before suing the insurance carrier may involve filing a complaint with the State Insurance Department. Most states have a Department of Consumer Affairs or a State Department of Insurance or similar agency to which you may lodge a complaint. These Departments can require the carrier to provide detailed information regarding the claim. The Department of Insurance may be able to assist in correcting an incorrect statement by an insurer.
Another step before suing involves even more than just filing a complaint — it involves filing for mediation or arbitration. First, whether the policyholder may mediate or arbitrate depends upon the language in the subject insurance policy. Provisions have been adopted in most jurisdictions which require that "all" disputes arising under the policy must be first mediated or arbitrated before a lawsuit may be filed. Whether or not policy language is present requiring mediation, arbitration or both, most Courts will refer a matter for mediation if they have "discretionary power" to do so:
In any litigation, the court shall have discretion to refer any dispute for mediation. . . . Defendants in tort actions may be referred for mediation upon request. As used here, "discretionary power" shall include the ability to dismiss the action as a condition to granting a meditation order.
Mediation will be required if both parties agree (or the Court orders) to mediate the dispute. Mediation is a non-binding process that addresses any disputes in the claim. For example, if the claim is for underpayment of an insurance claim, the scope of the mediation can be limited to the amount due under the policy.
Arbitration is different. Arbitration is binding. Whether a court or other third party decides, the result is "binding" upon both parties. Often the Court will order arbitration to occur when there is no question of coverage, but the parties strongly disagree over the amount due under the policy. Frequently the Court can find that there is no question as to liability under the insurance policy, but there are questions as to damages which cloud coverage.
A policyholder often considers mediation or arbitration. On the other hand, insurance companies frequently resist this process because it is expensive and time consuming. However, the Court has broad discretion to refer cases to mediation or arbitration.
If the case is referred to mediation, a date will be set. Usually, the Court assigns the matter to a local dispute resolution provider. If the Court assigns the case, the Court will select a neutral from a list of approved individuals.
If the specific party wishes to mediate, both interested parties must file a joint motion with a supporting affidavit. A proposed order must accompany the motion. The court will conduct a hearing and then will likely refer the matter to mediation. The Court may require the parties to retain a private mediator if there is no existing order at the time the case is assigned.
Both mediation and arbitration require that all parties engage in good faith settlement negotiations. Parties should also be prepared to bring all documents in compliance with the rules of the mediation forum. For example, in some cases, the parties must mediate within 90 days of the initial statement. Although the Court can extend the time, the parties should be diligent about preserving their rights to the insurance benefit.
Outcomes and Compensation
The potential outcomes of suing an insurance company for disseminating false information are variable, but the most important fact is that these cases do not always have to go to trial. Many times, settlements can be reached prior to trial, and if this occurs, the insurance company has to pay damages. A settlement amount can sometimes be even more advantageous for the victim plaintiff because it does not include the expenses of trial preparation and actually going through a trial, plus settlements can sometimes still be negotiated even if a lawsuit has been filed in court . The insurance company may not want to risk a loss at trial and so will agree to a favorable settlement with the victim before the lawsuit proceeds further.
When a case goes to trial, the plaintiff can be awarded both economic and non-economic damages. An award of damages is dependent on the facts of each case and there are no "standard" awards. However, here are some examples:
Picking the Right Representation
Your next step is to hire an attorney, who specializes in insurance litigation. Often times, people think they can take on insurance companies themselves, only to get outmatched and outsmarted by an insurance company team that knows what to expect and who is capable of putting off payment until the end of a legal process – which they hope you will not live to see. A qualified attorney will give you the power to counter the various delaying tactics used by insurance companies to avoid paying what you are due. Keep in mind that an attorney will not be able undo any deficiencies in your insurance policy, but should be able to give you a good chance at winning the lawsuit.
Common Difficulties when Suing Insurers
Typically, one of the initial problems with suing an insurance company is cost. Legal battles can be lengthy and costly. In order to maintain a strong case, you may need to hire an attorney to lead your case and ensure it is properly handled. Keep in mind that insurance companies are for-profit businesses. A case where you claim false information on a policy would be financially profitable for them to fight the case, as you know firsthand they do not want to pay out a claim. Be prepared for a lengthy battle against the insurer they may try to deny your claim.
While it would be ideal if an insurance company quickly addressed your claim and provided compensation, this is unfortunately not the case for most policyholders. It is well-known that insurance companies can be devious, and that they have been known to deny claims without reason.
Avoiding False Information in the Future
Although there is little that may be done after being subject to false information by a policy issuer, steps could be taken in advance of that point in order to prevent such conduct. Policyholders should carefully review their policies and any amendments or updates they receive from their insurance carriers and determine whether the terms set forth in the policies are clear. For example, if your policy states you are covered for wind and hail damage but doesn’t expressly cover flood and water damage, you may be better served to negotiate a new policy with your carrier that expressly states you are covered for wind and hail and lessor flood and water damage, as well. This can prevent future denials of coverage for cause. Adding to this, if you plan on making a claim for coverage said to be precluded by your policy’s terms , it is prudent to consult with an attorney to determine whether you should attempt to get the policy’s terms modified to either negate the stated exclusion or include a more tailored or specific exclusion, such as high-powered water or low-powered flooding. For future claims situations including claims that require policyholder cooperation, policyholders should maintain detailed records of all communications with their insurance carriers. Such records should include, but not be limited to, dates, times and forms of communication (i.e. telephone, in-person, etc.) and documentation regarding any steps taken or to be taken as part of the adjustment and investigation process. If a policyholder wishes to pursue a claim despite an insurer asserting the insured is not cooperating or not being forthcoming, it is imperative for a policyholder to maintain copies of all insurance policies, claim forms, replies, correspondence and notes of conversations with any and all insurance representatives.