A crucial fact for any injured person to recognize, and be prepared to deal with, is that an involved insurance company does not want to compensate you. Perhaps it is counter-intuitive. Insurance is designed to provide compensation for a loss. That's what the insured person pays for- coverage for a loss.
So, when a loss like a car accident happens, the insurance company automatically steps in, and pays, right? I can tell you from experience, nothing could be more inaccurate.
Insurance companies turn billions upon billions of dollars in profit every year. The business model is simple. Take in all the premiums you can, invest that cash prudently, and pay out as few dollars as you can on every claim. Most commentators insist the enormous profitability comes from prudent investment, not from underwriting profits. I've always wondered where all that investment capital came from. Even though many property casualty insurance companies frequently report a loss in underwriting [i.e. they pay more in claims and overhead than they have in premiums collected] there are massive economies of scale here. Paying $100 less on every claim means a net profit of a million dollars extrapolated over 10,000 claims, and the major insurers handle many, many more that a that in any month, let alone year.
One method employed by the insurance industry is to deny the claim.
The denial is rejection of responsibility, or liability for a loss. By law, the denial is supposed to be premised on a valid, substantiated reasons. Anyone who has been told by an insurance company that it is difficult for that insurance company to "understand" how they could be injured in a "minor" accident knows this is not the case.
Another method is to delay the claim.
Insurers have an obligation to promptly evaluate a loss, and promptly pay for it, when it is reasonable to do so. Delaying the claim by not timely reviewing documentation for example, is believed by some to have the effect of "wearing down" the injury victim, who desperately needs settlement funds to cover medical expenses and bills that have piled up while they are out of work. It can get worse. The worn-down potential plaintiff, in this scenario, may be willing to settle for less, due to the deteriorating financial predicament exacerbated by the dealy.
Even where there is coverage, insurers sometimes "disclaim" that coverage.
Maryland car and automobile accident lawyers run into this situation frequently. They have an injured client, and the insurance company for the at-fault driver says that there is 'no coverage' under the policy, or worse, the insurance company refuses to pay for any judgment. There may be legitimate reasons for a refusal to pay. For example, if an insurer shows the insured defendant refused or failed to participate in the proceedings, and the company was prejudiced in mounting an effective defense, that insurer is entitled to "disclaim" coverage, and refuse to pay any judgment. There may be other reasons that are not legitimate, or, are at least subject to challenge. The basis for challenges can range from the simple to the complex. Perhaps the insurance company is simply not interpreting its own policy correctly.
-This Article was updated by Eric Kirk on 10/21/19.