Filing a lawsuit against an insurance company is sometimes necessary when a claim is wrongfully denied or delayed. However, pursuing legal action can impact the claims process, potentially leading to further delays. Here’s how a lawsuit may affect an insurance claim.
Why Lawsuits Are Filed Against Insurance Companies
Policyholders may sue an insurance company for several reasons, including:
- Unjust Claim Denial: The insurer refuses to pay a valid claim without proper justification.
- Bad Faith Practices: The company acts dishonestly, such as delaying investigations or underpaying claims.
- Breach of Contract: The insurer fails to honor policy terms.
When an insurer is sued, the legal process begins, which can complicate and extend the timeline for claim resolution.
The legal procedure starts when an insurer is sued, which can complicate and stretch the path to claim settlement.
How Might a Lawsuit Delay Claims?
Many times, suing causes more delays because of the following:
- Legal Cases: It often takes months or even years to settle; court decisions take time.
- Paused Negotiations: Once a lawsuit is started, insurers could stop negotiations on claims.
- Discovery Process: Gathering evidence, witness testimony, and expert opinions extends the process.
Sometimes, though, litigation forces insurance companies to settle more quickly—especially if they wish to save court fees.
Legal Alternatives for Quicker Claims
Before suing, consider these faster alternatives:
- Appeal the Claim: Many insurers have an internal appeals process that can resolve disputes without legal action.
- Hire a Public Adjuster: A licensed adjuster can negotiate on your behalf to secure a fair settlement.
- Mediation or Arbitration: Some states require or encourage alternative dispute resolution (ADR) to settle claims quickly.
- State Insurance Regulators: Filing a complaint with your state’s department of insurance may prompt an investigation.
When Filing a Lawsuit Is the Best Option
Legal action is advisable when:
- The insurer refuses to pay despite clear policy coverage.
- Bad faith practices result in financial harm.
- Large sums are at stake, making the wait worthwhile.
Conclusion
A lawsuit against an insurance company can delay claims due to legal complexities, but it may also be necessary for policyholders facing unjust denials. Exploring alternative dispute resolution methods can often lead to a faster settlement. Consulting with an attorney can help you determine the best course of action.