Understanding Insurance Litigation: What Policyholders Should Know When Coverage Dispute Arise

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This page has been researched, written, and reviewed in accordance with our editorial guidelines to ensure accuracy and relevance. This page has been reviewed and approved by Founding Partner, Tobias Licker. The last updated date reflects the most recent review of this content.

Insurance policies are designed to provide financial protection when unexpected events occur. Whether it involves property damage, business losses, personal injuries, or other covered events, policyholders generally expect their insurance company to honor the terms of their policy.

Unfortunately, disputes sometimes arise between policyholders and insurance companies regarding coverage, claim values, or claim denials. When these disputes cannot be resolved, insurance litigation may become necessary.

What is Insurance Litigation?

Insurance litigation provides legal disputes between policyholders and insurance companies

regarding insurance coverage, policy interpretation, claim denials, delays, or other insurance-related issues.

Insurance litigation may arise in both personal and commercial insurance matters.

Common types of insurance disputes include:

• Denied insurance claims

• Delayed claim payments

• Underpaid claims

• Coverage disputes

• Bad faith insurance practices

• Property damage claims

• Business interruption claims

• Liability coverage disputes

Why Insurance Disputes Occur?

Insurance policies are legal contracts that define the rights and responsibilities of both the insurer and the policy holder.

Disputes may arise when parties disagree regarding:

Policy Coverage

Insurance companies and policyholders may interpret policy language differently, leading to disagreements about whether a particular loss is covered.

Claim Valuation

An insurer may acknowledge coverage but dispute the amount owed for damages.

Exclusions and Limitations

Many insurance policies contain exclusions, limitations, and conditions that can affect coverage.

Alleged Failure to Comply With Policy Requirements

Insurance companies may argue that a policyholder failed to satisfy certain obligations, such as timely reporting a claim or providing requested documentation.

Common Types of Insurance Policies Involved in Litigation

Insurance litigation may involve various types of policies, including:

• Homeowners insurance

• Commercial property insurance

• Business interruption insurance

• Automobile insurance

• General liability insurance

• Professional liability insurance

• Life insurance

• Disability insurance

What Is Insurance Bad Faith?

Insurance companies owe certain duties to their policyholders, including handling claims in good faith.

In some circumstances, an insurer's conduct may constitute bad faith if it unreasonably denies, delays, or fails to properly investigate a claim.

Examples may include:

• Failing to conduct a reasonable investigation

• Unreasonably delaying claim decisions

• Misrepresenting policy provisions

• Failing to communicate regarding claim status

• Denying valid claims without adequate justification

Whether an insurer acted in bad faith depends on the specific facts and applicable state law.

Steps Policyholders Can Take During an Insurance Dispute

If a coverage dispute arises, policyholders may wish to:

Review the Insurance Policy

Carefully review the policy language. including exclusions, limitations, and coverage provisions.

Maintain Documentation

Keep copies of:

• The insurance policy

• Claim forms

• Correspondence with the insurer

• Photographs and videos

• Repair estimates

• Receipts and invoices

Document Communications

Maintain records of conversations, emails, and letters exchanged with the insurance company.

Respond Promptly

Timely responses to requests for information may help avoid unnecessary delays.

Alternative Methods for Resolving Insurance Disputes

Not every insurance dispute proceeds to trial.

Depending on the circumstances, disputes may be resolved through:

• Negotiation

• Mediation

• Arbitration

• Litigation

The appropriate approach depends on the nature of the dispute, policy language, and the positions of the parties involved.

When Should You Consult an Insurance Litigation Attorney?

Policyholders may wish to seek legal guidance when:

• A claim has been denied

• Payment has been significantly delayed

• The insurer offers substantially less than expected

• Coverage is disputed

• Significant financial losses are involved

An attorney can evaluate the policy, review the circumstances surrounding the claim, and explain available legal options.

Protecting Your Rights During an Insurance Dispute

Insurance disputes can be complex and may involve detailed policy language, contractual obligations, and state-specific laws.

Understanding your rights and obligations under an insurance policy is an important step when coverage disputes arise.

At A & L, Licker Law Firm, LLC, we represent individuals, and businesses throughout Missouri and Illinois in insurance litigation matters and work to protect our clients' rights when disputes arise with insurance companies.

References

• National Association of Insurance Commissioners (NAIC): https://content.naic.org

• Insurance Information Institute (Triple-I): https://www.iii.org

• Missouri Department of Commerce and Insurance: https://insurance.mo.gov

• Illinois Department of Insurance: https://idoi.illinois.gov

DISCLAIMER: This article is for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Laws change regularly and the application of any rule depends on the specific facts of each case. For guidance regarding your specific situation, please contact A & L, Licker Law Firm, LLC directly.