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Get Your Claim Paid: Calling the Lawyers

If all else has failed, you'll have no choice but call a lawyer. This really should be a choice of last resort -- most of the time, the legal fees will eat into whatever settlement you finally reach. And, if there's no settlement, you'll still have the legal fees to pay.

If you must sue, keep a close eye on the proceedings.

The main legal claim that people can make when they feel their insurance claim has been wrongly denied is breach of contract. An insurance policy is a contract and the insurance company promises to pay valid claims in that contract.

After a breach of contract claim, the next most common legal claim is bad faith.

In most cases, the law assumes that both parties to a contract are held to an implied standard of good faith and fair dealing. However, in insurance disputes, that standard is usually applied only to the insurance company.

In bad faith cases, the courts determine the standards for proper claims handling procedures. Bad faith suits can seek actual and punitive damages -- and they can be filed by either policyholders or third parties who've suffered an insured loss.

The caveat: Bad faith claims can be tough to prove. You usually have to show fraud, deceit, malicious or willful behavior or intent on the part of the insurance company. Most courts require you to prove that the insurance company knew of, or recklessly disregarded, the lack of a reasonable basis for denying a claim.

The third common legal tool is a charge that the insurance company has violated state unfair claims settlement laws. These laws define prohibited acts in the claims process. They allow administrative penalties (usually state-sanctioned fines) and private lawsuits to recover damages against insurance companies that violate the statutes.

The standards of proof for recovery under the unfair claims practices statutes are generally lower than those for bad faith claims because you don't usually have to show intent or malice.

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