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How to Sue an Insurance Company for Bad Faith

Suing an insurance company for acting in bad faith means pitting yourself against an army of defense attorneys in a complicated and hard-fought legal battle.

However, you don’t need to worry about a thing when you enlist the help of a bad faith insurance lawyer.

There Are Several Approaches to Suing an Insurer for Bad Faith

Our team begins by looking at three approaches to claims that come from different points of law:

  • Breach of contract. Your insurance policy is a contract between you and the insurer. The company agrees to cover certain losses and you agree to pay a certain amount each month for that coverage, just in case you experience those losses. If the insurer breached the contract, you can sue. It is important to note that not all breaches of contract constitute bad faith. Some breaches are just simple mistakes that can be easily rectified.
  • Unfair or deceptive practices. North Carolina protects consumers against bad faith actors through the Unfair and Deceptive Trade Practices Act. We may pursue a claim under this Act if the insurer acted unfairly or deceptively. An unfair act would be demanding that you fill out multiple forms with the same information to unnecessarily delay your claim. A deceptive act would be claiming the policy does not cover your loss when it does.
  • Bad faith. When an insurance company acts in bad faith, it means it is purposefully acting in a way that violates its contract with you. An example of a bad faith act is if the insurance company deliberately delays settling your claim until your financial need forces you to accept a small settlement.

Our team knows how to use these approaches in your claim against the insurer.

Working with a North Carolina Attorney to Sue an Insurance Company

Whether you are the president of an HOA, an estate owner, or an owner of a commercial property, repairing or replacing damaged larger homes and buildings is expensive.

Insurance companies are for-profit businesses. Their goal is to bring in more money than they pay out, as is true for all companies. Your goal of repairing or replacing your property is sometimes at direct odds with the insurer’s goal, which can make this a difficult process.

Fortunately, an attorney’s job is to stand up against the insurer and get you the compensation you need. To do so, you and your attorney will:

  • Go over the date, cause, and extent of the property damage
  • Detail damages beyond the main dwelling, including personal property, pools, recreational buildings, barns, and other structures
  • Study the insurance policy, its riders, and exclusions
  • Map a timeline and details of the process, beginning with when you filed a claim, when the insurance company responded, and every step you and the insurance company have taken involving the claim

Your attorney will work with the insurance company to resolve any legitimate issue that is preventing the resolution of your claim and negotiate for a full and fair settlement. However, if it appears that the insurance company has breached the contract, behaved unfairly or deceptively, or acted in bad faith, you and your attorney can file a lawsuit against it.

How a Bad Faith Act Affects Compensation

As stated above, every breach of contract is not necessarily a bad faith action. Bad faith is a breach of contract so egregious that it becomes a harmful action toward the policyholder. This difference is key to the compensation you recover from the courts. In North Carolina, if the court finds that your insurance company breached your contract but did not act in bad faith, you may recover what your policy stated you should recover for the property damage you suffered, plus legal fees.

However, if the court finds that your insurance company breached the contract and acted in bad faith, you may recover the amount of your original claim plus punitive damages. Punitive damages are meant to punish the insurance company for their bad faith behavior and stand as an example to others of what they may face if they also act in bad faith.

Recognizing When an Act is in Bad Faith or Just Bad for Your Claim

Standing in front of your seriously damaged home or investment property with a delay or denial of claim from the insurance company in hand is infuriating. You upheld your end of the bargain, paying every month, and it is supposed to be there for you when disaster strikes. Instead, the insurer has adopted a hands-off, not my problem stance. Unfortunately, some circumstances allow the insurer to follow the policy and not fully support your loss, such as:

  • Your policy has limits on how much it has to pay out for certain damages and your loss exceeds the limit.
  • You want your beautiful home and property back as it was, but the insurance company typically only covers the loss as it existed the moment before the damage occurred. For instance, you spent $20,000 on a new roof five years ago but after five years of normal exposure to the elements and general aging, the roof is no longer worth $20,000. It may be worth $15,000, and that is what the insurance company pays (depending on your policy limits). It doesn’t have to pay $20,000 for you to replace the roof you originally paid for.
  • You failed to promptly tell the insurance company of the damage and it was unable to investigate it properly.
  • The building or property that was damaged is not covered in your policy, or not covered from damage by an earthquake, flooding, or whatever caused the damage.
  • You are usually required to mitigate damage before it happens or to stop it from getting worse after it happens. If you don’t do that, the insurance company may not support the claim. For instance, if you did not maintain trees on your property and one crashed into your home during a storm, you may find it difficult to recover the compensation you need to cover the damage. Another example of a failure to mitigate is not placing a tarp over a damaged roof after a storm to prevent further water damage in your home.

However, not all denials are valid. Sometimes the insurance company is acting in bad faith. Examples of potential bad faith actions may include:

  • Extending the investigation and decision on your claim beyond a reasonable time
  • Denying your claim with no explanation or for a reason that opposes your policy agreement
  • Offering a quick settlement of an unreasonably low amount and refusing to negotiate
  • Refusing to communicate or delaying responses beyond an acceptable time frame
  • Demanding information already provided or claiming files have not been received or are missing
  • Misrepresenting the details of your policy coverage to you

Documenting Your Claim and the Insurance Company’s Response

Suing an insurance company for bad faith is not easy. You have to prove there was a breach of content and an intent to deceive. The more documentation you have supporting your case the better, as documentation is proof. Types of documentation you should collect include:

  • Images or videos of the damage
  • A copy of your claim
  • Copies of emails, letters, and other written communications, both formal and informal, from the insurance company and notes on all phone conversations or other non-written communications
  • A copy of your policy
  • A copy of your appeal if your claim is denied
  • If the appeal is denied, a copy of your demand letter that supports your case—as this is the step before filing a lawsuit, you should work with an attorney before sending a demand letter
  • A copy of your complaint filed with the North Carolina Department of Insurance

You and your attorney will use the documentation you have accumulated in your lawsuit against the insurance company.

A Lawyer Can Handle Your Case With No Upfront Fees

You are already waiting on thousands of dollars to repair or replace your property. You don’t need more expenses. Bad faith insurance lawyers handle these cases on a contingency-fee basis. This means you pay nothing up front and only pay if you recover compensation.

There is no financial risk when you work with an attorney on a bad faith claim.

Call Whitley Law Firm for More Information on How to Sue an Insurance Company for Bad Faith

At Whitley Law Firm, we offer free case evaluations as a chance for you to ask questions and get an understanding of where your case may go, should you wish to file a lawsuit against an insurance company. Call us at (919) 785-5000 to schedule your free consultation in an office near you.