When you are involved in an automobile accident that may have been at least partially your fault, your auto insurance carrier has an obligation to protect your interests if a claim is made against you. The problem that often arises is the conflict of interest your carrier has with you. Insurance companies are in the business of making money, but they are still supposed to put their insureds' interests ahead of their own. Unfortunately, all too often auto insurance companies tend to ignore this obligation which can have serious personal and financial consequences for you.
The Duty to Defend
After an automobile accident occurs, the involved insurance companies will make at least some preliminary determination of fault for the accident. If you are determined to be responsible for an accident and someone else's injuries, your insurance carrier has a duty to defend and indemnify you in the event of a claim. What this means is that your insurance company is obligated to make a reasonableeffort to settle the claim against you, and they must pay the claimant (the injured party) for the injuries and damages they suffered. This is precisely why you pay premiums for your auto insurance, month after month and year after year.
The Conflict and the Insurance Company's Obligation to You
Under California law, "[n]o insurer shall attempt to settle a claim by making a settlement offer that is unreasonably low..." (10 California Code of Regulations § 2695.7, Standards for Prompt, Fair and Equitable Settlements) Beyond this duty, every insurer has an obligation to attempt in good faith to settle claims within their insured’s policy limits, if that can reasonably be accomplished. The duty to settle is imposed as a matter of public policy. "The implied obligation of good faith and fair dealing requires the insurer to settle in an appropriate case although the express terms of the policy do not impose such a duty." (Communale v. Traders and General Ins. Co., (1958) 50 Cal. 3d. 654, 659)
What happens when an insurance adjuster makes an unreasonably low offer to the injured party? You (and not the insurance carrier) wind up getting sued in court. If that happens, the lawsuit against you becomes public record, and the information concerning the suit is almost instantly available to potential creditors, prospective employers, etc. Beyond this, you will be the one who has to be directly involved in the litigation process (answering written discovery, sitting for a deposition, appearing in court, etc.). If your insurance carrier unreasonably fails to resolve a case against you then you may have a cause of action against the insurance company for breach of contract and bad faith.
If you have been sued in court because your auto insurance carrier has placed their own economic interest ahead of yours, you should contact an insurance bad faith attorney for a free consultation.
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