When It Comes to Insurance, You Don’t Have a Good Neighbor

Imagine you have been in an auto accident, and you have sustained a serious injury along with substantial damage to your car. You put in a claim with your insurance company, but they refuse to pay it, or they offer you a settlement amount worth far less than what you deserve.

It happens far more often than you might realize. The National Association of Insurance Commissioners (NAIC) compiles a list of common complaints that consumers have about their insurance companies lowballing them, or refusing to pay out on a claim. Forbes reported, “The… [2011] NAIC study states that just over 26% of all complaints stem from delays that policyholders experience when waiting to receive a claim. The denial of a claim is the next most frequent complaint and accounted for just over 14% of all complaints. In a related complaint, another 14% stemmed from unsatisfactory claim amounts offered by an insurance firm.”

The report breaks down complaints by type of insurance; almost half of all complaints were about accident and health insurance, with auto insurance and homeowners a distant second and third. All these numbers do, unfortunately, is define the problem. They don’t tell how devastating it can be for coverage to be denied, and the hopelessness that comes along with massive medical or property damage bills.

Bad faith laws don’t protect the injured

The problem, in a nutshell, is this: your insurance company doesn’t really have to pay you. It’s not unlawful, because they can chalk it up to a difference of opinion as to what your claim is worth. Furthermore, Maryland’s bad faith law is so weak that it doesn’t help you. You have to make a claim with the insurance commissioner before you can pursue a bad faith action, and the insurance commissioner rarely validates a bad faith claim because the company generally says “We didn’t pay them because of X, Y or Z.” The entire process is incredibly time consuming for the injured party (and for his or her attorney, if he or she chooses to seek legal counsel), and in the end, your claim is highly likely to be denied anyway.

Why Maryland needs stronger bad faith laws

Several years ago, Maryland saw a hurricane whip through our shore-based towns. People lost their homes as a result. After having dutifully paid their homeowners’ insurance for years, they put in their claims for the damage. Many people were wrongfully told by their insurers that it was the flooding, not the winds of the storm, that led to the damage – and because they didn’t have flood insurance, their claims were denied.  Eventually these people prevailed in court and claims were paid.  Many people could not afford to wait and settled for less than full value.

A few years ago in California, State Farm was embroiled in a class-action lawsuit because of their tactics to avoid paying their customers’ claims. Instead of offering their customers the full value or repair costs for their vehicles after an auto accident, they knocked 5% of the worth off across the board for all policies. So if you had a claim for $20,000, they offered you $19,000 to settle it. Most people who made claims needed the money fast, and were willing (if not happy) to let the $1000 slide; after all, who wanted to go to court over $1000, especially when you would have to pay for your own attorney fees whether you won or lost? But State Farm made this standard practice: if 100 people were in this exact predicament, that means State Farm made $100,000.  This is a good example of why the public needs to be protected with strong bad faith laws and access to the courts through class action litigation.

We say this time and time again: the insurance company is not your friend. It is not your good neighbor. They are not the good hands people. Insurance companies look to maximize profits and care little for the sick or injured.  The need for stronger bad faith laws in Maryland is clear because innocent people are suffering every day because of insurance company greed. To best protect our drivers, our patients and our homeowners, we recommend that you seek the counsel of an attorney in the earliest stages of your claim.

Plaxen Adler Muncy, P.A. is a premier personal injury law firm in Maryland. Please call 410-730-7737 or contact us today for a free consultation.