First Party vs. Third Party Insurance Claims
Most state laws require that all licensed drivers carry a minimum amount of liability insurance to cover any damages that may be caused to another passenger or vehicle in the event of an accident. Homeowners are usually required to carry insurance on their home. Even if they're not required by law to carry homeowner's insurance, most Americans choose to do so anyway to protect what is typically their largest asset.
Furthermore, depending on where your home is located, you may be required or choose to carry specialty insurance policies to cover your home from damage caused by a natural disaster. For example, most lenders will require that homes built within a flood zone have a separate flood insurance policy. Homeowners who live on active fault lines may choose to carry earthquake insurance. Residents of the Gulf Coast and East Coast generally carry insurance to cover their home from hurricane damage. There are many different types of insurance policies, but all are considered either first-party or third-party policies.
You may have heard the terms "first-party" and "third-party" in reference to insurance policies. These terms arise from contract language since an insurance policy is simply a specific type of contract.
What Is a Third-Party Insurance Claim?
In a third-party insurance claim, there are three parties. The first party is the insured individual. The second party is the insurance company. The third party is another individual. Therefore, a third-party insurance claim is made by someone who is not the policyholder or the insurance company. The most common type of third-party insurance claim is a liability claim. For example, if you cause an accident on the freeway and injure a passenger in the other vehicle, that passenger can be a third party who can file a claim against your insurance company.
In this case, because there is no contract between the insurance company and the injured passenger (i.e., a third party), the passenger is entitled to make claims for things that may not be covered under the insurance policy. These are generally things such as medical expenses, loss of wages, and compensation for pain and suffering. A third-party claim is commonly referred to as a liability claim because someone else is liable for the injuries suffered by the third party. If the insurance company is unable or unwilling to settle with the injured third party, the third party can bring the liability claim to the tort system.
What Is a First-Party Insurance Claim?
A first-party insurance claim is between the policyholder (the first party) and the insurance company (the second party). These are contractual claims that are contingent on the specific language of the insurance policy (i.e., contract). An example of a first-party insurance claim would be a homeowner who suffers fire damage to his or her home. In this case, the homeowner will make a claim with the insurance company to cover the damage and repairs. The insurance company will compensate the homeowner according to what is in the insurance policy. This is why homeowners need to make sure they know what is covered and excluded in their policy.
Can First Party Insurance Claimants File a Lawsuit?
Yes! Even though what is covered under a first-party insurance policy is specified in the contract, insurance companies do not always pay out everything they are required to by law. In the insurance industry, this is referred to as bad faith insurance practices.
Some examples of an insurance company acting in bad faith include:
- Delaying or denying compensation without a justifiable reason
- Failing to acknowledge and reply to a claim promptly
- Failing to perform a proper and thorough investigation into the claim
- Attempting to settle a claim for a less than reasonable amount
- Failing to inform the insured of an appeals process
- Failing to provide a reasonable explanation for a denied or underpaid claim
- Requiring unnecessarily burdensome documentation to process a claim
- Using harassing investigative methods to intimidate the claimant
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There are many other ways in which insurance companies act in bad faith to avoid paying out fair compensation. If your insurance company is engaging in bad faith practices, you are entitled to file a lawsuit. If you believe your insurance company is not complying with the terms of your insurance policy, contact a first-party insurance lawyer to learn about your legal options. At Arnold & Itkin, our lawyers have helped thousands of homeowners receive fair compensation after initially having their claim denied or underpaid by their insurance company.
Just a few reasons why you should give our firm a call today:
- We have recovered billions of dollars on behalf of our clients.
- We offer completely free and confidential consultations.
- We have set several state records with our victories.
To learn more about how we can help you, contact our insurance lawyers today.
