Have you ever wondered what would happen to your personal and financial assets if you were involved in a vehicular accident that caused injury to another party, even if you carry liability insurance?
It’s scary to think your insurance company might not act in your best interest, but many times, they do not! So it’s extremely important to educate yourself so you know your rights should you ever be in a situation where your insurance company places its interests above your own.
By having a contract with its policyholders, insurance companies owe them a fiduciary duty to act in good faith and deal fairly with its policyholders. When insurance companies fail to uphold its duties to its policyholders, a bad faith claim may arise.
In Missouri, there are two types of bad faith claims that may be brought against insurance companies: first-party claims and third-party claims. It is important to know that only policyholders can bring bad faith insurance claims against their own insurance companies.
Missouri First-Party Insurance Claims
A policyholder may have a first party claim when an insurance company wrongfully denies or withholds payment for a loss covered under the insurance policy. Here’s an example: Let’s say you are in a one-person car accident and you submit a claim to your insurance company for the damage done to your vehicle, and per your insurance policy, the insurance company is obligated to pay for this loss up to the policy limits. If the insurance company willfully and without reasonable cause refuses to pay a claim, policyholders can bring a bad faith claim for vexatious refusal to pay. In addition to the amount owed for the claim, this special cause of action allows policyholders to collect additional penalties for the insurance provider’s unreasonable refusal to pay.
In order to bring a claim for vexatious refusal to pay, the policyholder must abide by the terms of the policy in demanding payment for a loss covered by the policy. Then the policyholder must make a demand for payment at least 30 days prior to filing the lawsuit, and the insurance company’s refusal to comply must be without reasonable cause.
Missouri Third-Party Insurance Claims
Failure to Defend and Settle Claims
Insurance companies also owe fiduciary duties to its policyholders when a claim is made against them by a third-party. This includes the duty to defend the policyholder against the claim, and also to negotiate and settle the claim with the policyholder’s best interests in mind. When the insurance company fails to uphold this duty, its policyholder may bring a bad faith claim against them.
The most common types of third-party claims are “failure to settle” claims. When a policyholder is involved in an accident and causes injury to another person or damages their property, their insurance company will enter into negotiations with the injured party. While the insurance company does not have an obligation to settle the claim, they do have a duty to protect the financial interest of its insured.
If the insurance company is given an opportunity to settle the claim within the policy limits, but places its own interests before its policyholders’ by refusing to do so, then you as the policyholder may have a bad faith claim against your insurance company. For this reason, it can be extremely beneficial to speak with an experienced personal injury attorney to ensure your insurance company resolves the claim against you.
Review Your Insurance Policy
Remember, each time you pay your monthly premiums, you are holding up your end of a bargain requiring your insurance company to protect you in the event of a covered loss. As a policyholder, it is important that you understand the terms of your policy, exactly what it covers, and your obligations when bringing a claim. So obtain and review a copy of your insurance policy and begin educating yourself today!