Can You Sue a Car Insurance Company?

When you purchase auto insurance, you’re essentially entering into a contract. You agree to pay your premiums on time, and the insurance company agrees to handle your claims fairly, honestly, and promptly—to use the common legal jargon, “in good faith.”

What Good Faith Means in Arkansas

Under Arkansas law, insurers have a duty of good faith. This includes investigating claims thoroughly, processing them efficiently, and providing reasonable settlements. If an insurance company acts dishonestly, delays unnecessarily, or refuses to pay without proper justification, it may be acting in bad faith, opening the door to a potential lawsuit.

Although you expect your insurance company to protect your interests after a car accident, there are times when the insurance company fails to fulfill its obligations. Here are some common reasons policyholders might sue their own insurers.

Bad Faith Insurance Practices

Bad faith occurs when an insurance company violates its duty to act fairly and reasonably toward its policyholders. Examples include:

• Unreasonable Denial of Claims: If your insurance company denies your claim without valid reasoning or investigation.
• Unexplained Delays: A drawn-out claims process without justification may qualify as bad faith.
• Failure to Communicate: Ignoring your inquiries or providing vague, unhelpful responses.

Under Arkansas law, bad faith claims are taken seriously. If proven, you may be able to collect compensation for financial losses and, in rare cases, additional damages for emotional distress.

Breach of Contract

An insurance policy is a legally binding contract. When an insurer fails to uphold its promises, such as refusing to pay a covered claim or not honoring policy terms, it becomes a breach of contract. In Arkansas, suing insurance companies for breach of contract requires proving:

1. A contract exists between you and the insurance company.
2. The insurance company failed to fulfill a specific policy obligation.
3. You suffered damages as a result.

Unfair Settlement Offers

Insurance providers often undervalue claims, offering settlements far below what you may need to recover from your injuries and accident. They may use a harsh “take it or leave it” approach and pressure injured car accident victims to sign quickly. This tactic preys on individuals who are financially strained or uninformed about their rights.

If you believe that the insurance company has devalued your claim or isn’t treating you fairly, you can file a lawsuit seeking the compensation you’re entitled to. Remember, research shows that insurance companies consistently pay more to accident victims who hire a lawyer!

In some cases, you may need to sue the other driver’s insurance company rather than your own. While this can be more complicated, Arkansas law provides avenues for pursuing these claims.

Some of the most common reasons people sue an insurance company after an accident include:

• Claim Denial: This is when a valid claim is denied without proper justification.
• Delayed Payment: Insurers that delay compensation can cause financial hardship.
• Undervalued Claims: If the company gives you an offer that’s far below what’s necessary to cover damages or medical bills.
• Emotional Distress: Dealing with an uncooperative insurer can lead to stress, anxiety, and other emotional challenges.
• Pain and Suffering: If an insurance company’s actions make things worse for you, additional damages may be recoverable under Arkansas law.

Before going to court, it’s important to try other solutions first. Taking these steps after an accident can make your case stronger and might even solve the problem before it becomes a lawsuit.

1. Document Everything. Keep detailed records of your claim, including:

• Communications with the insurance company.
• Copies of all correspondence.
• Photos of damages and accident reports.
• Any witness statements you were able to gather after the accident.

2. Attempt Direct Resolution

Contact the insurance provider to talk about your concerns. Sometimes, escalating your complaint within the company can solve the problem. Start by reaching out to your claims adjuster or the person handling your case. Clearly explain the issue, whether it’s a delay, a denied claim, or a settlement that seems too low. Many insurance companies also have appeal processes you can use to challenge denied claims or low offers.

3. File a Complaint with the Arkansas Insurance Department

The Arkansas Insurance Department oversees insurers operating in the state. Filing a complaint with them may prompt the company to resolve your issue.

4. Consider Alternative Dispute Resolution (ADR)

Mediation or arbitration can be faster and less expensive than traditional litigation. These methods involve a neutral third party to help negotiate a settlement. An experienced Arkansas car accident attorney can advise you on whether ADR is best for your situation.

If other efforts fail, suing the insurance company may be your best option. Here’s what the legal process typically looks like: