No doubt you’ve heard the State Farm commercial jingle, ‘Like a good neighbor, State Farm is there.’  Many of us may believe that our insurance companies are our friends. As Kansas City bad faith insurance attorneys, we have represented countless people who have wondered if their insurance company is there to protect them or rip them off. 

You faithfully pay insurance premiums month after month, year after year – and when the unexpected does happen, you may find yourself wondering whether your auto insurance company is really there when you need it most.  Perhaps an agent drags his or her feet in filing your claim, or an insurance adjustor only authorizes payment for a portion of what you believe you deserve, or the insurance company denies your claim altogether. The reality is that insurance companies are in business to make money, just like every other business.

It is important to realize that a fiduciary relationship exists between an insured and insurer, which does not exist in most other business transactions.  An insurance company owes a fiduciary duty to their insureds to see they are properly compensated and/or protected in the event of a loss. In simple terms, insurance companies owe a duty to put their insured’s interests above their own financial gains.

There are two types of claims that can be made against an insurance company.

  1. If it is your own insurer who refuses to pay your claim (such as uninsured motorist or homeowner’s claim) without a reasonable cause or basis, or fails to properly investigate the claim in a timely manner, this is called a “first party” claim for vexatious refusal to pay. There is a fiduciary duty on the part of the insurer to act in good faith and with fair dealing.
  2. If another person causes you injury by negligence then that negligent person’s insurance company owes their insured (not you as a third party) the duty to act in good faith and fair dealing.  They owe their insured a duty to defend and indemnify (pay) the claim within their insured’s policy limits, to properly and timely investigate the claim and to put their insured’s interests above their own.  If they breach that duty to their insured by failing to properly compensate you (as a third party), then there may be a claim against the insurance company for their wrongful acts. However, that claim belongs to the negligent party against their own insurance company and that is commonly referred to as a “third party” bad faith insurance claim.

It may be less clear whether an insurance agent or broker owes the same type of fiduciary duties and responsibilities to their insurance customers.  An insurance agent usually is the employee of one particular insurance company, such as American Family Insurance, Allstate, Farmers, GEICO and others, while an insurance broker is not employed by any one insurance company but instead can place an insured with one of several insurance companies.  In most states, an insurance agent’s actions may bind the insurance company while an insurance company may not be held liable for a broker’s negligent actions. However, the individual agent/broker may have errors and omissions (E&O) coverage for their negligent actions.

If you have been the victim of negligence and have not been properly compensated by the insurance company, it is imperative that you have an attorney represent you who understands bad faith insurance practices or vexatious refusal to pay claims.  At Griggs Injury Law, LLC we fight vigorously on behalf of clients who have been wronged by insurance companies. Contact our insurance dispute attorneys today for aggressive legal guidance and representation.