Insurance negligence

Insurance negligence refers to a policyholder’s or insurer’s failure to exercise reasonable care, resulting in harm or loss, such as an insurer improperly denying valid claims. Courts classify negligent misrepresentation as providing false information about coverage, as seen in 2023 when State Farm paid $25 million after misleading homeowners.

Policyholders cause negligence by omitting key facts on applications, for example, failing to disclose past accidents can trigger claim denial. Insurers breach duty of care by delaying investigations; in 2022, Allstate faced lawsuits for waiting over 90 days to process auto accident claims, as reported by YourInsurance.info.

Insurance agents act negligently if they inaccurately describe policy exclusions; for instance, a California agent in 2021 was fined after clients learned flood damage was never covered. Negligence in underwriting often results from overlooking risk factors; Moody’s reported that oversight contributed to $1.4 billion in unexpected 2020 fire losses.

Claim adjusters practicing negligence include ignoring photographic evidence provided by customers; GEICO settled multiple suits over this issue between 2019 and 2022. Policy voidance occurs if insurers prove intentional nondisclosure due to applicant negligence; Progressive cited this in voiding 12% of rejected policies in Texas in 2023.

Courts assign comparative fault percentages when both insurer and insured are negligent during claim processing, impacting payout amounts. States like Florida penalize insurance companies with fines up to $100,000 per incident for gross negligence harming policyholders.

Repeat negligence leads regulatory agencies like the NAIC to suspend licenses, as occurred with three regional auto insurers in Illinois during 2021 inspections.