You’ve seen all the home and auto insurance commercials; they’re good for a laugh, and you may have gotten that perfect rate on your insurance. You’re a big fan and, in your mind, your insurer can do no wrong...

Then "it" happens: the big accident, the catastrophic fire, or the large-scale theft. It’s just what you got your insurance policy for in the first place, right?

But what if all is not well between you and your insurer after the incident? Can you sue, and should you? This article discusses nine key points to consider as you approach the process of potentially suing your home or auto insurer.

1. Report the incident right away.

Under most policies, you must report your loss to the insurer promptly—often within 24 hours—for your claim to be viable. Time is therefore of the essence.

2. Be mindful of your statements to the insurance company.

If you’re suspected of having committed a crime and are taken into custody, the police are required by law to give you a Miranda warning, including that "anything you say can and will be used against you."

No such similar warning is given before you speak to your insurer, but it's worth keeping in mind that your insurer is now deciding how much money to compensate you for your claim (and in some circumstances, whether to compensate you at all). Thus, you should be careful in your statements to your insurer, and try to avoid casting yourself or your claim in a bad light. In particular, try to avoid beginning sentences with, “I’m sorry that I...” Remember that your objective is to provide the insurer with facts—facts that are necessary for you to recover on your claim.

3. Begin compiling precise documentation and photos.

It is very important to begin compiling precise documentation and photos in support of your claim right away, and—if possible—within the first 24 hours of the incident. This will help eliminate confusion and ambiguity at later stages in the claims process, and the insurer will have no question about what you’re claiming.

4. Work with a claims adjuster.

After you have experienced a loss and made a claim, your insurance carrier will assign a claims adjuster to your case. This will be the principal person with whom you'll be in contact during the claims process. The claims adjuster’s job is to answer your questions, gather information about your case, and assess the insurer’s responsibility to pay out on your claim.

5. Keep backups of all documentation.

As a policyholder, you need to show the damages that you suffered, the amount of money to which you are entitled under the particular terms of your policy, and the amount you spend for temporary emergency repairs or to mitigate your damages. Also, if you're in a car accident, it’s important (if you can) to take photos of the crash site before any of the vehicles are moved. A frequent point of contention in auto accident claims is "who was where" at the time of the crash. Once the cars are moved, that becomes a "he said, she said" contest.

6. Keep a detailed timeline.

Maintain a log of your actions pertaining to the incident by date, and document all calls that you have with the insurance company. Throughout the entire claims process, the insurance company is keeping detailed records of these same interactions—so you should too!

To the best extent that you can, note the first name and the first initial of the last name of each of the insurance company representatives with whom you speak. (Note the entire last name if it is the claims adjuster.) Your memory is not going to be any match for the insurance company’s concurrent notes if you are not taking notes as well.

7. Call in your chits.

If you've been a policyholder for many years, remind the insurance company that you're a long-time policyholder. You should be treated like one.

8. Be wary of an excessive delay in payment of your claim.

What constitutes as an "excessive" delay will obviously vary depending on the circumstances, and it would not necessarily be just a couple of weeks or a month. However, if the process is dragging on with no conclusion in sight, then you have cause to be concerned.

9. Consider whether to file a suit.

If you've experienced an excessive delay in payment of your claim, or your insurer has denied coverage, it’s time to consult with an attorney. Many attorneys will tell you that it is easier for them to "work your problem" if they are able to get to work prior to a denial of coverage being issued against you.

There are three main types of legal theories or "causes of action" to bring a lawsuit against your own insurance company:

  1. A breach of contract.
  2. A violation of a consumer protection law.
  3. A violation of a "bad faith" law on the part of the insurer. Showing "bad faith" on the part of the insurer usually requires a higher showing of misconduct on the part of the insurer than a breach of contract would.

The important takeaway here is that you don't necessarily have to wait until your insurer has outright denied your insurance claim in order to sue them. There may be a viable cause of action under any of the above three legal theories if the insurer fails to affirm or deny your claim within a reasonable period of time after you have provided proof of your loss to the insurer.

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This article provides general information and is neither legal advice nor a substitute for reference to federal or state law or the terms of any insurance policy you may hold.