Why the Insurance Company is Obligated to Speak with Their Insured Person Before Settling Your Claim

I was involved in an accident a few weeks ago when I was hit by a guy who ran a red light. The police gave him a ticket and wrote a report showing that he was at fault. His insurance company won’t pay my claim because they say that they have to talk to him first. They told me that I should call my own insurance company. I think that’s a rip off and I told them that I’m going to get a lawyer and sue for personal injury and everything. Is this sort of horrible treatment common? Aaron A, Linganore, MD

This might seem like horrible treatment to you, and many other people, but the simple fact is that the insurance company has NO logical legal choice but to do what they are doing. Your insurance company would do the same to a person trying to make a claim against your policy if they were unable to contact you. Here is why.

An insurance policy is a contract between the insurance company and the policy holder. It outlines your duties if you are involved in an accident and those include reporting the accident in a timely manner (as quickly as possible), and cooperating with the investigation of the accident (that should include at least a conversation). In return, the insurance company agrees to protect the policy holder against any claims; protection includes paying those claims it owes. This obligation is the same for every insurance company in every state in the US.

If the insurance company were to go ahead and pay a claim that they appear to owe (no matter how clear that fault is), they could face huge consequences if their policy holder were to then contact them and raise valid issues such as non-permissive use or mistaken identity. Perhaps the driver involved in the accident was an excluded driver on the policy. No matter how clear a case seems things like that happen.

In the extreme, if an insurance company pays a claim without speaking with its policy holder, thus violating the contractual terms of the policy, and some issue does arise, the insurance company could be on the hook for bad faith or unfair claims handling to their insured. Your claim is a pittance compared to those potential penalties.

If the policy holder fails to comply with their duties to contact and cooperate with their insurer, the insurance company may deny coverage altogether, as if there were no policy at all. These are the facts whether you have a lawyer or not, though perhaps the attorney you hire could send a letter to this other driver and scare him into finally calling his insurance company.

The reason why this guy’s insurance company is suggesting that you contact your own carrier for help is that they really have no way of knowing when their policy holder is going to cooperate with their efforts to contact him or her. In the meantime, your life, or at least your ability to drive an undamaged vehicle is put on hold. If you were really injured, your bills will need to be paid by someone; why not your no-fault coverage (which a savvy attorney would most likely advise you to use as a collateral source anyway.)

We realize that if the other guy really was at fault it may seem unfair to you to do that but would you rather enjoy immediate vindication, or would you rather just get on with your life? Your insurance company will take care of the headache of trying to recover that money. The claim will catch up with the other guy sooner or later.

This article was written for informational purposes and is not intended to take the place of competent local legal counsel.

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