Q:
How long does an insurance company have to pay on a claim (such as a theft under my renters insurance)? Are there laws stating a certain period of time that a company would have?
Answer:
Your state has some form of regulation that defines what is acceptable conduct in the insurance industry. Many states have enacted an "Unfair Insurance Practices Act" or an "Unfair Claims Settlement Practices Act". Or, the regulations may be found in a broader law that encompasses all trade practices.
The specifics of these regulations vary widely from state to state, but, generally speaking, an insurer is required to:
- acknowledge your claim within a certain time frame, such as 15 days,
- investigate your claim promptly,
- make a good faith attempt to process a prompt, fair, and equitable settlement of claims in which liability is reasonably clear.
Additionally, an insurer may not refuse to pay your claim without a valid reason.
If you feel that your insurance company's agent or claims adjuster has violated your state's regulations, talk to that person's supervisor. If you get no satisfaction, file a complaint with your state's insurance department. If the department receives enough similar complaints, it will conduct an investigation. If it finds that the insurance company has a pattern of misconduct, it may impose a fine, punitive damages, or, for especially grievous offenses, revoke the company's license.
A minority of states allow you to sue an insurance company privately for a regulations violation against you individually. If you find yourself in such a dispute, some legal rules may help you, such as:
- coverage provisions will be construed broadly,
- limitation and exclusion provisions will be construed narrowly, and
- ambiguities in the policy will be interpreted in your favor.
In some states, if you are successful in court, you may only recover the amount of your claim. But, in other states, you may also be awarded legal fees and punitive damages.
Here are a few tips that may be useful for dealing with an insurer about a claim.
Before you buy the policy:
- Take notes while the agent is explaining the proposed coverages, and save them for future reference
- Read the proposed policy and understand the key terms, such as deductibles, exclusions, and limitations
- Complete the application form honestly and thoroughly
Before you have a claim:
- Read your actual policy to understand coverages
When you have a claim:
- Review your policy and notes
- Promptly notify the insurance company of the loss
- Do not exaggerate the claim
- Keep a log of all correspondence with the insurance company (especially telephone calls)
- Gather materials to prove your claim (e.g. receipts)
- Always keep copies of any documents you give to the insurance company
- Get your own estimate of the loss
- Do not submit to an "examination under oath" without legal representation
- Do not sign a check or release until you are satisfied it is fair