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Bad car insurance practices

Hit the road with the right car insurance policy

Auto insurance is a must if you own a car. Most states require you to carry insurance, and without it, you face financial disaster if you cause a serious accident and get sued.

Car insurance can also pay to repair your vehicle if it gets damaged in a crash or natural disaster, like hail or wildfire, or is vandalized or stolen.

Car insurance coverage types

One policy can include several types of coverage.

Liability insurancepays for others' damage and injuries when you cause an accident. Most states require you to carry at least a minimum level of bodily injury and property damage liability coverage. See states minimum car insurance requirements.

The coverage limits are expressed as three numbers. Limits of 25/50/25, for example, would provide up to $25,000 per person injured in an accident, up to $50,000 of coverage for injuries per accident and $25,000 for property damage per accident. Remember, liability insurance pays out to other people; it does not cover you, your passengers or your car.

Personal injury protection (PIP) or medical payments (MedPay) coverage pays the medical bills for you and your passengers after a car accident, regardless of who caused the crash. PIP also covers lost wages and funeral costs. Some states require you to buy PIP or MedPay.

Uninsured motorist (UM) and underinsured motorist (UIM)comes to the rescue if you're hit by a driver who has no insurance or not enough coverage. UM pays your medical bills if you're injured in an accident caused by an uninsured driver. UIM kicks in if your medical expenses exceed the other driver's liability coverage limits. UM and UIM are required in some states.

Uninsured motorist property damage (UMPD)covers your car if an uninsured driver hits you, but the coverage isn't available in every state. Roughly one in eight drivers is uninsured, according to a 2014 Insurance Research Council report.

Collision coverage pays to repair your own vehicle after a crash. It's an optional form of coverage, although your car-loan lender might require you to have it. Collision will kick in if you hit a tree, for example. Or, if an uninsured driver hits you and you don't have UMPD, you could make a collision claim for your car's repairs. Any collision payment will be reduced by the amount of your collision deductible.

Comprehensive coverage has a misleading name because it applies only to certain circumstances. It pays out if your car is stolen (and not recovered) or damaged by a natural disaster, if you hit an animal or if your car is vandalized. Like collision, comprehensive is optional, but your lender might require it. Here too, a comprehensive claim payment will be reduced by the amount of your deductible.

Roadside assistance and other extras can come in handy in a pinch. Roadside assistance covers towing and emergency roadside service when your car breaks down. Rental reimbursement pays for a rental car while your car is in the shop after a covered accident. Gap coverage kicks in if the insurer declares your car a total loss, and the payout from the insurance company for the vehicle's actual cash value is less than the amount you owe on the car loan. See: Save yourself some car insurance grief: Buy gap coverage.

How car insurance rates are set

The price you pay for car insurance depends on the type and amount of coverage you buy, the deductible for collision and comprehensive insurance, the kind of vehicle you own and the characteristics of you and the other drivers listed on the policy. Here are the most and least expensive 2016 vehicles to insure.

Factors that insurers generally consider when setting your rate include:

  • Your driving record. Speeding tickets and other infractions increase premiums.
  • Your accident and claims history. There's no point trying to hide your previous problem. Insurers will access your C.L.U.E. report to find out your claims for the past seven years.
  • Your credit record. A good credit history helps keep premiums low. Insurers say there is a link between spotty credit history and the likelihood of filing claims. Not all states allow credit to be a factor in auto insurance pricing.
  • Your age. Rates are highest for teenagers because they are risky drivers. Their crash rate per mile driven is about three times that of drivers age 20 and older, according to the Insurance Institute for Highway Safety. Rates begin to drop around age 25, and you'll likely enjoy the best rates in your 50s and early 60s.
  • Your sex. Young women usually qualify for lower rates than young men, but the difference diminishes with age.
  • Where you live. Car insurance rates vary widely by state and also by ZIP code. Insurers base rates on where the car is garaged.
  • How much you drive. Your daily commute and annual mileage will affect your rate. The more your car is on the road, the greater your chance for a claim.

Shopping for auto insurance

Consider your assets when deciding how much liability insurance to buy. The state minimum requirements for coverage are too low for many people. Collision and comprehensive insurance are important for newer vehicles but usually aren't cost-effective for clunkers.

Shop around for car insurance quotes - rates, policy options and customer service vary by insurer. Insure.com's customer satisfaction ratings reveal which insurers get the highest marks.

And make sure you take advantage of discounts in order to lower your bill. Typical discounts include those for multiple vehicles on a policy, auto safety features, antitheft devices and good students. You might also be able to get a discount for paying in full, buying home insurance with the same insurer, or being a customer for a few years or more.

Are insurance settlements taxable? By Emmet Pierce, Insure.com / Jan. 20, 2017

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by FreeAdvice staff

Insurance Claims: Typical Bad Faith Insurance Lawsuits and Awards

by FreeAdvice staff When you file an insurance claim with an insurance company, by law, in any state, that company owes you a duty to act in good faith. Simply put, this means that the insurance company must not look for ways to escape its obligation to investigate the claim or to pay you. Doing so would constitute bad faith. Bad faith claims and lawsuits may stem from one or more of a number of actions or inactions by the insurance company from denial of coverage to failure to negotiate a settlement. Here are some of the typical reasons insurance companies get sued for bad faith:
  • Unwarranted denial of coverage
  • Failure to communicate pertinent information to the claimant
  • Failure to conduct a reasonable investigation of the claim
  • Refusal to pay the claim without investigating
  • Failure to deny or pay the claim within a reasonable period of time
  • Failure to confirm or deny coverage within a reasonable period of time
  • Failure to attempt to come to a fair and reasonable settlement when liability is clear
  • Offering substantially less money to settle than the true value of the claim
  • Failure to promptly provide a reasonable explanation for denial of a claim
  • Failure to enter into any negotiations for settlement of the claim
  • Failure to respond to a time-limit demand
  • Failure to disclose policy limits

Bad faith litigation can take many different forms and will, like the underlying cases they stem from, either result in a settlement with the insurance company, an arbitration decision, or a verdict one way or the other. Here are some different types of cases and their outcomes. Keep in mind that the cases presented here are for illustrative purposes only. Each case is unique, including yours, and no one case will have exactly the same result as another.

Boicourt v. Amex Assurance Co.

Award: $2,006,000

A boy severely injured in a vehicle accident settled for more than $2 million pursuant to a policy that provided only $100,000 in coverage, because the insurance carrier initially refused, in bad faith, to disclose the policy limits.

Matson Terminals v. Home Insurance Co

Settlement: $33.65 million

Home Insurance Company denied coverage for a $10 million earthquake claim, and a California jury concluded the denial, based on a policy exclusion, was in bad faith. The jury awarded $11,000,000 in punitive damages. The appeals court, in affirming the award that included $23.5 million in compensatory damages, held that the insurer led the policyholder to believe there was coverage, and encouraged it to initiate repairs.

David Clayton v. United Services Automobile Association

Award: $3.9 million

A California jury found the insurance company's offer of $10,000 on policy limits of $300,000 to parents whose only child was killed in an auto accident was unreasonable and in bad faith. An appellate panel affirmed the award. The California Supreme Court denied review of the case.

Vann v. The Travelers Insurance Company

Award: $26.5 million

The former owner of an auto repair shop was asked to vacate the premises after his landlord died. Following, he was sued for causing environmental damage on the property. He asked his insurance company to provide him with a defense. First they denied he had a policy, and then, after admitting such a policy existed, they inundated him with burdensome and harassing requests for information with which he could not comply. After denial of the claim, Mr. Vann sued for bad faith and the jury agreed. The Travelers’ appeals all the way up to the U.S. Supreme Court were unsuccessful.

For a no-cost, no-obligation evaluation of your case, fill out our free case evaluation form and an experienced attorney will contact you. Our Insurance Advice site has links for all state departments of insurance.

For more information about bad faith insurance practices and claims, see the following articles:

How to File a Complaint with Your State Department of Insurance

Insurance Claims: How an Insurance Bad Faith Attorney Can Help

Don’t Be Afraid of the Big, Bad Insurance Company!

Free Legal Advice – Get Informed

General Insurance Bad Faith QuestionsInsurance Bad Faith ArticlesDamagesFiling an Insurance ComplaintInsurance Claim InvestigationRights of the InsuredTop 10 Worst Insurance CompaniesMedicare Substitute PoliciesPost Claim UnderwritingTypes of claims Show More

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You may feel particularly vulnerable when filing a claim, especially if you aren't familiar with the process of making claims and getting payments. Fortunately, your state has specific regulations that protect you against unfair claims settlement practices, such as slow or deceptive claims handling.

Every state has laws that prohibit unfair, discriminatory, or deceptive insurance practices. These regulations define what is acceptable conduct in the insurance industry and cover everything from sales practices to policy cancellation. If you're looking for regulations in your state, you may find them tucked in a broader law that applies to all kinds of trade practices and to fraud, or there may be something called an "Unfair Insurance Practices Act" or an "Unfair Claims Settlement Practices Act." You may be surprised how often you can get the law to work in your favor when you're having trouble with your insurer.

Claims practices that are verboten will be similar from state to state because they are based on a model act developed by the National Association of Insurance Commissioners (NAIC). NAIC model acts are generally adopted by all states, but since states may tweak theirs first, your state's law will likely be slightly different. To find out more about how the law works in your state, contact your state's insurance department. (Find your state's contact information.)

Most state laws concerning this topic make a distinction between an auto insurance company's own customers and a third-party claimant. For example, if you cause an accident, you would file a claim with your own insurance company. But if another driver damages your car, you would file a claim with their insurance company — and in that case, you are the third-party claimant. Generally, an insurance company has more of an obligation to its own customers.

What insurance companies can't do

Can't misrepresent your policy

Under most Unfair Claims Settlement Practices Acts, an auto insurance company may not knowingly misrepresent material facts or relevant policy provisions in connection with a claim. It may not attempt to enforce policy provisions that were altered by the company without notice to you or without your knowledge or consent.

Can't influence other policy settlements

Typically, the company may not drag out the settlement of a claim under one portion of your policy where liability and the amount of the loss are reasonably clear, so as to influence settlements under a different portion of your policy. For example, your auto insurer can't refuse to pay your bills under the medical coverage in your policy so that you'll settle your uninsured motorist claim. Usually, this prohibition only applies if you're filing a claim under your own policy, not if you're pursuing a third-party action against someone.

Must acknowledge your insurance claim

An insurance company must acknowledge and act promptly in response to your communications about your claims. In some states, the insurance company must respond within a certain time frame, such as 15 days

Must process your claim promptly

Insurers must implement standards for promptly investigating and processing claims. Otherwise, an unethical insurance company could endlessly stonewall you by saying it is still investigating your claim.

No delays for extra forms

An insurer may not delay an investigation or payment of claims by requiring unnecessary or repetitive reports and proof-of-loss forms.

Can't force you to sue

A company may not force you to go to court in order to recover amounts due under a car insurance policy by offering substantially less than the money ultimately recovered. Otherwise, an insurance company with lots of lawyers on the payroll could just say, "Sue us!" and make you go to court. Obviously, that would discourage many individuals with small claims

Can't appeal lots of claims

Similarly, an insurance company may not exploit the legal system by appealing almost all of the arbitration awards in favor of policyholders as a way to force a settlement or compromise of claims. The insurance company is allowed to appeal, but appeals can't be a standard business practice aimed at forcing you to take less than you're owed on a claim.

Can't refuse or delay insurance claims without a darn good reason

An insurance company may not refuse to pay your claim or delay payment without a valid reason. It must promptly provide you with a reasonable explanation why your claim was denied or why a compromise settlement was offered. The insurer is required to make a good faith attempt to process a prompt, fair, and equitable settlement of claims in which liability is reasonably clear.

Also

Your state may even have implemented standards for resolving specific types of claims. For instance, your state may stipulate what types of replacement car parts are permitted after an accident and how a total car loss should be compensated.

What to do if you have an insurance claim problem

If you suspect that your insurance company, agent, or adjuster is violating your state's Unfair Claims Settlement Practices Act, talk to the individual's supervisor. If you don't get any satisfaction, file a complaint with your state's insurance department.

State insurance regulators investigate these practices, and a number of similar complaints against a particular insurance company could trigger a market-conduct examination. Regulators will then determine if the company is in compliance with applicable insurance regulations.

If regulators find a pattern of misconduct, they will fine an insurance company or take other punitive action. In extreme cases, the state may even revoke a company's right to do business.

The Unfair Claims Settlement Practices Act in your state may not apply to every type of claim. For instance, the act may not apply to surety, malpractice, or workers compensation claims.

What the law can't do for you

In a few jurisdictions, you can point to violations of the Unfair Claims Settlement Practices Act as a basis for a bad-faith action against your insurance company, and a company that makes a practice of violating the act may be subject to punitive damages.

In an overwhelming majority of states, however, violations of the Unfair Claims Settlement Practices Act won't allow you to sue a company privately. Nevertheless, catching your insurer in the act does give you some leverage in your negotiations with the company.

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