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3 Big Mistakes Made By Insurance Companies

Posted on: December 26, 2022

LEGALLY REVIEWED BY:
Chi Hung Nguyen
December 26, 2022

Unreasonable insurance claim denial is an insurance company mistake

An insurance company is a corporate entity, which means it is a corporate “person” under the law. This is the reason that businesses can buy and sell property, enter into contracts as well as hire and fire employees. But even with the growing use of technology in the insurance business, this does not mean that insurance companies do not fall prey to the human error of its employees.

Despite all of the resources at their disposal, insurance companies can and do make mistakes. This is not surprising considering just how many claims are filed every year in Texas. The Texas Department of Insurance publishes reports every year related to the countless insurance claims made.

An experienced personal injury attorney can catch the insurance company if they make a big mistake with your claim.

Personal injury lawyers evaluate your case after a car accident or truck accident to make sure that the insurance company acts in good faith when handling your claim.

Failing to act in good faith can result in a bad faith claim against an insurance company that turns a relatively small claim, into a claim worth millions of dollars.

Often, when a lawyer gets involved, the insurance companies sit up and pay attention. They recognize that a lawyer knows all of the legal deadlines that the insurance company must meet, what duties the insurance company has to carry out and understand that the lawyer has the ability to force the insurance company into court.

Three common mistakes made by insurance companies include:

  1. Failing to Manage and Supervise

Insurance companies are typically very large corporations with outside related, affiliated businesses and subdivisions or departments within itself. There is a big and complex  internal structure within an insurance company. It is the job of the insurance claims manager to correctly watch over and supervise the adjusters and employees below him, and if mistakes are made, he must correct any mistakes.

Once a senior or supervising insurance adjuster is set to work with the insurance company attorneys, and the adjuster must make sure that all settlement offers be immediately brought to his attention. Failing to communicate something as important as a settlement offer can expose the insurance company to becoming liable, or responsible, for more than the stated insurance policy limit or contribute to the insurance company’s loss of the case. Sometimes, and insurance company will sue its own lawyers for malpractice because they fail to transmit a demand that is within the insurance policy limits to the insurer.

It is worth taking note that once the claim reaches the point of engaging the insurance company’s lawyers, the insurance company may not be looking to settle the claim. Insurance company and defense lawyers typically bill and charge by the hour, rather than by contingency fees. This means the more time insurance company lawyers spend on defending the insurance company’s case against an injured claimant, the more money they make. So, if the insurance company is not interested in settling, its lawyers may not be interested in settling either.

  1. Failing to Provide All of the Needed Documents

One mistake that can be committed by both sides is the failure to completely request, examine and provide the required documents. For the personal injury attorney handling a massive number of cases, a mistake that may be made is overlooking a single but important detail within hundreds of pages of medical records. For the insurance company, not getting all of the medical files makes it impossible to conduct the Insurance Medical Exam (IME). The IME doctor will likely find out that he cannot finish his medical evaluation of the injured claimant to see and verify whether the injuries are as serious as claimed, all because of the mistake of not providing missing medical records and files.

Not only does this fail insurance industry standards, but this kind of failure can result in claims against the insurance company. There may be claims that the insurance company unreasonably created delay in the medical evaluation and payment of the insurance claim. When an insurance employee does not request and provide everything required, this kind of mistake can have a negative impact on the insurance company’s defense against a claim.

  1. Failing to Offer Policy Benefits

Often, bad faith claims are brought in first-party insurance cases. When you make a claim with your own insurance company, it is a first-party claim (compared to third-party claims where the person making the claim is making the claim with someone else’s insurance company). Examples of first-party claims are when someone makes a personal injury claim with their own insurance company under-insured motorist coverage, or for property loss after a fire.

A third mistake that insurance companies make is trying to make a settlement for an insurance claim by making a settlement offer instead of providing the benefits the insured person is already entitled to receive. This offer insurance companies make basically make the injured claimant an offer, and then have the claimant sign a Release.

A release is essentially a binding contract that frees an insurance company from following through on obligations and duties owed, or acts as proof that a claimant is voluntarily giving up his or her rights, in exchange for accepting the settlement offer. This often includes releasing the insurance company for bad faith claims, attorneys fees and more.

Bad Faith

Some mistakes by insurance companies are more serious than others. More severe mistakes may reach the level of bad faith. Bad faith means the insurance company unreasonably denies an insurance claim. The law recognizes a difference between “reasonable” denial of a claim, and “unreasonable” denial of a claim. Unreasonable denials of a claim can lead to bad faith claims that ultimately cost the insurance company more. Understanding the difference between a reasonable and unreasonable denial of a claim should be left to an experienced attorney, since this requires understanding both contract law and tort law, which often controls personal injury claims.

Still, there are some indicators that may be able to show you whether the insurance company is acting in “bad faith” or not:

  • The insurance company failed to properly evaluate a claim. Sometimes the insurance company makes an innocent mistake. Other times, the insurance company acts badly on purpose. These intentional acts can be failing to process a claim, or take an extremely long time to process a claim. Delaying payment of an insurance claim helps save the insurance company money, and the insurance employees are typically not given an incentive, or motivated to pay claims as soon as possible.
  • The insurance company did not properly investigate the claim. Insurance companies have a duty to investigate claims on time. This means they cannot take an excessively long time to begin looking into an insurance claim. This also means the insurance company cannot simply avoid following up with a claimant at each phase of the process. Insurance companies must respond to calls, letters, phone messages, etc. Investigations must also be thorough. This means that the insurance company investigation needs to include looking at all of the evidence in a case, including evidence that works against the insurance company. They have to consider all of the facts. The insurance company cannot say they failed to investigate just because they did not request certain documents or evidence that were easily able to be obtained by the insurance company. Lastly, the insurance company needs to look at the evidence fairly and cannot distort the facts in favor of their client, the insured, over the injured claimant’s statements.
  • The insurance company hides facts about the case or its own mistakes. An insurance company may try to improperly hide information about the claim, including what kind of coverage is offered. The insurance company also cannot hide the basis for denying a claim, or the reason coverage is limited. Insurance companies have a legal obligation to inform their policyholders about how much insurance coverage they have.

There are many examples of bad faith lawsuits as well.

If you think the insurance company is making serious mistakes in handling your claim, contact our firm and speak with a skilled personal injury attorney today.

Contact an experienced personal injury lawyer 

Without experience in the insurance industry or legal experience, understanding which factors or evidence can help or hurt your case can be difficult to understand.

Are you trying to secure your financial recovery with the help of experienced attorneys? If so, we can help.

The Pusch & Nguyen Law Firm has helped countless Texans handle their insurance disputes. Our experienced trial lawyers have gone up against some of the biggest names in the insurance industry while successfully bringing home payouts for clients. Our successful reputation speaks for itself, and with offices in both Houston and San Antonio, we are well equipped to assist Texans who are in dire need of our services. Register online for a free case evaluation or call us today at 713-524-8139 (Houston) or 210-702-3000 to schedule an appointment with a member of our team.

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