Do I have to accept a claim from the insurance company that was a lot less than my actual damages?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 16, 2021

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Insurance settlement offers vary, but in the best case the policyholder has a sense of his or her rights from the policy contract and the insurance company acts according to those rights. When an adjuster makes a very low insurance settlement offer, it could mean that the insurer is acting0 illegally.

In the case of an insurance company making an offer so low that it forces the policyholder to either litigate or walk away, this could be an act of bad faith. Most states have insurance laws that require insurance companies to act in a fair and reasonable manner when dealing with policyholders. An unreasonably low settlement offer may violate those laws.

Negotiating with an Insurance Company

Before accusing an insurance company of a legal violation, make sure all your bases are covered. When negotiating a settlement, the insurance company will make an initial offer with the expectation of a counteroffer. When an offer seems too low, the first step should be to review all of your paperwork, estimates, claim forms and other documents. Then based on that information, make a counteroffer that seems more fair. Get any commitments related to the negotiation in writing.  

In some states, you may be able to get a mediator’s help with the negotiations. Many state courts or community groups have mediators with a background in special areas, like insurance law, and can help for little or no cost. Using a mediator could help with the negotiation process and help you get the settlement you deserve.

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Taking Legal Action Against an Insurance Company

If negotiations and counteroffers don’t work and the company insists on a low settlement, legal action may be in order. While the law varies by state, most insurance contracts contain what is called an implied covenant of good faith and fair dealing. When an insurance company refuses to pay an insurance claim or judgment or does not pay enough, this is considered bad faith.

Depending on the circumstance, you can sue the insurance company for breach of contract and for a tort claim of negligence. The breach of contract claim would come from the company not honoring any terms clearly listed in the contract. The negligence claim would come from the company breaching its duty of good faith and fair dealing.

Getting Help

Some states may have other causes of action outlined in their statutes. For this reason, and to make sure you have the most relevant insurance law information, you should check with your state insurance commissioner before filing a lawsuit. In addition, it is never a bad idea to consult with an insurance law attorney, who will know whether the low settlement offer you received was actually bad faith, or whether there was some other reason why the offer was so low.

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