When Auto Insurance Companies Don’t Play Fair, You Need to Sue Them

The following is adapted from Not a Good Neighbor by Brian LaBovick.

Insurance companies have a legal obligation to protect their customers, that means you, from being sued and possibly having to pay judgments. You buy insurance because not only you don’t want to be in a lawsuit, but if something happens while you are driving, you need a way to pay for the damages, whether it be car repairs or human injury if you’re at fault.

The insurance company is supposed to protect you, but sometimes insurance companies negotiate in a way that ultimately hurts their client. In some instances when that happens, you can turn around and sue them for bad faith.

Here’s what that scenario might look like. Say you cause an accident that leaves another driver badly injured. Your insurance company is obligated to ensure you are protected from a lawsuit. If you get sued, they have to hire an attorney and pay for your defense.

But in this scenario, when the injured driver files a claim, your insurance company basically tells the driver to go to hell. Although the injured driver’s medical bills are quite high, your insurance company declines the plaintiff’s request that it tender your $100,000 bodily injury policy (BIL) policy limit. They offer a much smaller settlement.

In response, the plaintiff hires a bulldog attorney who also demands the policy limit and lays out the extensive reasoning for that settlement. Tender the policy limits, and we can end this, the bulldog says. But your insurance company turns him down as well, even though a reasonable decision would be to tender the policy limits and settle the case.

Instead, the case drags on for two years of discovery and court hearings until the insurance company caves in and offers to tender the policy limit of $100,000. Now it’s the bulldog lawyer’s turn to play hardball. He tells the insurance company that he doesn’t want the $100,000. He wants more — a lot more — and indicates he will take his chances with the jury.

The bulldog lawyer sues for $1 million and wins. The insurance company is on the hook for only the $100,000, but you — the client whom they promised to protect — are looking at a $900,000 judgment. You don’t have that kind of money. Is your only choice to declare bankruptcy?

Nope. You can sue your own insurance company for failing to protect you when they could have settled, and should have settled, and would have settled if they had properly evaluated the case against you on a timely basis.

And that’s what happens. After the case is over, you find out that the bulldog lawyer tried to settle the case for $100,000 and that your insurance company could have and should have settled. But they didn’t.

The bulldog now invites you to join his cause. He advises you that you can bring a “bad faith lawsuit” against your own insurance company, and you can collect the $900,000 you owe the plaintiff, which will settle the case against you and keep you out of bankruptcy.

Bad faith lawsuits don’t happen often, but it’s not unusual for insurance companies to hurt themselves by dragging their feet in cases like the one I described above. A good example is one of my current cases involving a motorcycle rider who had $1 million in medical bills after he was hit by another driver who carried a $100,000 BIL insurance.

We contacted the at-fault driver’s insurance, told them it was a big case, and offered to provide them with whatever information they needed. But all we got was radio silence.

Four months later, we sued. They had a legal obligation to investigate this case and they didn’t do it. We went to mediation, and the insurers offered $500,000, but as I said, my client already had $1 million in medical bills, so we didn’t accept it. And you know what? If we go to trial, I will ask for more than seven figures for my client.

For more advice on suing your insurance company for a fair settlement, you can find Not a Good Neighbor on Amazon.

Brian LaBovick is a lawyer and entrepreneur who has earned more than $400 million for his clients after establishing his injury law practice in 1991. As one of two students selected to the prestigious Order of the Barrister as the outstanding litigator in his class at the University of Miami, Brian was hired by the US Department of Justice Honors Graduate Program after graduation. He is now CEO of the LaBovick Law Group, an advisory board member of Keiser University’s legal education division, a past president of the North Palm Beach County Bar Association, and former director of the Palm Beach County Justice Association.