What Happens if the Insurance Company Wrongfully Refuses to Settle?

September 2, 2021 Accident

What Happens if the Insurance Company Wrongfully Refuses to Settle?

 

In Louisiana, if you or a loved one has been injured in a car accident or your property has been damaged, you are entitled to make an insurance claim and file a civil lawsuit seeking money damages from the party that caused the accident. Often, accidents in Louisiana are settled by the insurance company for the at-fault party. But, what happens if the insurance company refuses to settle? Most insurance companies behave ethically; but some do not. When an insurance company wrongfully and unlawfully refuses to settle a claim, the aggrieved party can sue the insurance company for what is called “bad faith refusal to settle.” In such a case, the aggrieved party — the injured victim — still has the right to recover money damages from the at fault party and ALSO has a right to sue for damages against the insurance company that wrongfully refused to settle the underlying case. Here is what you need to know about bad faith refusal to settle in Louisiana.

 

Louisiana has two statutes governing insurance bad faith claims: La. Rev. Stat. 22:1892 covering claims for property damage and La. Rev. Stat. 22:1973 covering personal injury claims. These statutes are intended to provide remedies for people with insurance and insurance claimants whose claims are improperly handled or to whom payment is unreasonably delayed. Both statutes provide that an insurance company owes a “duty of good faith and fair dealing” to those making claims. Further, insurance companies have a duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims. More specifically, the statutes require that the insurance company must institute loss adjustment within fourteen days after notice of the claim and, upon sufficient proof of loss, the insurance company must pay the amount of any claim within thirty days after it has been established that they must pay those claims.

If an insurance company breaches these duties, the insurance company is liable for any damages sustained as a result of breaching these duties. An insurance company can be sued and, if bad faith refusal to settle is proven, the victim can be awarded penalties of up to 50% of the amount that should have been paid for property damage claims (a “Section 1892 claim”) and up to two times the amount of the damages for bad faith in personal injury cases (a “Section 1973 claim”). Successful litigants can also recover their attorneys’ fees.

To succeed on a bad faith claim, an aggrieved claimant must establish three legal elements:

  • That the insurance company received satisfactory proof of loss
  • That the insurance company failed to pay the claim within the applicable statutory period, or failed to make a written offer to settle the claim, and
  • That the failure to pay or timely tender a reasonable settlement was arbitrary, capricious or without probable cause

Part of demonstrating a “satisfactory proof of loss” includes showing that the person or business insured by the insurance company was, in fact, at fault and is legally liable. For example, with a Louisiana auto accident, the claimant must show that the other driver was at fault. Otherwise, the insurance company has a legitimate legal defense to a bad faith claim.

Our Attorneys Can Help

For more information, contact the Louisiana personal injury lawyers at Mansfield, Melancon, Cranmer & Dick LLC. We have a proven track record of success handling many types of Louisiana personal injury cases including car accidents, boating accidents, motorcycle accidents, premises liability accidents, and cases involving nursing care facility abuse/neglect. Contact us by calling one of our offices: New Orleans at (504) 500-1108, Baton Rouge at (225) 612-0800, or Lafayette at (337) 409-0003. You can also request a free consultation by using our “Contact Us” page.