It happens more often than you think. As if being injured in an accident wasn't difficult enough, you receive notice from the at-fault party's insurance that they have either denied your claim or made a settlement offer far less than the cost of your injuries. Their reason: upon investigation, they have determined their insured is not liable, or only partially liable, for your injuries (otherwise known as a "negative liability determination").
While this can be a very frustrating development, especially with medical bills piling up, having an insurance company deny or "lowball" your claim is not the end of the story. There are still things you can do to fight this adverse determination and hopefully get the insurance company to pay.
Why an Insurance Company Might Deny or Reduce Your Claim Amount
The fact is that insurance companies, by default, look for reasons not to pay claims. It's a backward system, but in essence, these companies exist to protect their customers, paying claims still hurts their bottom line—so they're not motivated to pay unless they see no reason not to. The most common reasons an insurance company might give for a negative liability determination include:
- The accident was not caused by their insured. This is probably the most common reason insurance companies give for a negative liability determination. They will likely point to evidence such as police reports, eyewitness testimony, or vague arguments to support their claim.
- The insured was not fully at fault. This is a favorite tactic of California insurance companies since California is a pure comparative fault state. Comparative fault means that even if their policyholder caused the accident, if you were partially at fault as well, then your damages will be reduced in proportion to your level of fault. For example, if the insurance company investigates the accident and determines that their insured was 30 percent at fault and you were 70 percent at fault, they will try to pay only 30 percent of your damages. (Obviously, insurance companies love to scour the evidence looking for ways to say you were also at fault.)
- The injuries were not caused by the accident. This is another common reason for a negative liability determination, especially in cases where there are pre-existing injuries or conditions. The insurance company will try to poke holes in your medical records or claim that your injuries existed before the accident and were not caused by it.
Bad Faith Claim Denials
By law, insurance companies in California have a duty to act in good faith on behalf of policyholders—including conducting a prompt and fair investigation of claims and promptly paying for covered risks. When an insurance company denies a claim that should have been paid as part of the coverage, this is called "bad faith." Examples of bad faith include:
- Not conducting a reasonable investigation of the claim
- Failing to provide a timely response to your claim
- Asking for information that is not necessary to determine coverage or liability
- Unreasonably delaying payment of a valid claim
- Refusing to defend their policyholder in a lawsuit where there is clear evidence of coverage
- Making a lowball settlement offer without adequately investigating the damages
Insurance companies may try to couch bad faith claim denials in a wide range of vague reasons and policy exemptions, but if an insurance company acts in bad faith, you have the right to sue them for damages in addition to what they should have paid.
What You Can Do If Insurance Issues a Negative Liability Determination
If an insurance company has issued a negative liability determination in your case, all is not lost. There are still ways to fight the decision and potentially get it reversed. Here are the steps you should take immediately:
- Gather all documentation related to your accident. This includes correspondence with insurance companies, police reports, medical records, and any other relevant information.
- File a complaint with the California Department of Insurance. If you believe the insurance company has acted in bad faith, you can file a complaint with the California Department of Insurance. The DOI will then investigate your claim and take appropriate action against the insurance company if they find evidence of bad faith.
- Hire an experienced Los Angeles personal injury attorney. An experienced lawyer will know how to investigate your accident, gather the necessary evidence, send demand letters, and build a strong case to get the insurance company to reverse its determination.