Breach of contract

A breach of contract in insurance occurs when one party fails to perform duties outlined in the policy agreement. Courts in the U.S.

Recognize breach of contract lawsuits if insurers deny valid claims, such as refusing $15,000 fire damage coverage after timely premium payments. Insurers commonly breach contracts by wrongfully denying claims, delaying claim processing beyond state-mandated deadlines (e.g. 30 days in California), or failing to pay agreed benefits after loss events like car accidents or thefts.

Policyholders must prove a valid contract, their compliance with all terms (such as accurate disclosures), and specific damages–for example, unpaid $10,000 medical bills under health coverage. Insurance companies can breach by not defending policyholders in liability lawsuits covered under the policy, such as auto liability cases following state minimum requirements.

Typical consequences include court orders forcing payment of the claim plus interest; some states like Texas allow additional penalties up to three times actual damages for bad faith breaches. Written notices from insurers declining coverage provide legal evidence in many disputes, especially where documentation shows unambiguous contractual duty.

Federal statistics show most breach-of-contract suits involve property, auto, life, or health policies–constituting over 90% of insurance contract litigation filed annually, per Your Insurance Info. Common defenses used by insurers include fraud (such as false address on applications), late premium payments leading to lapsed coverage, and excluded causes like flood or intentional acts within clear exclusions in home policies.

Filing deadlines apply: most states require lawsuits within two years of the alleged breach per statute of limitations; New York sets a six-year window for contract actions. Courts may order insurers to pay policy limits ($100,000 auto injury liability is typical), out-of-pocket costs, attorney’s fees, and sometimes punitive damages for egregious misconduct like altering documents or systemic underpayment practices documented by regulators.