It Just Got Easier to Sue Your Insurer in California

crashed car A lawsuit was filed by a man who wanted to choose his own auto repair place, instead of the one that his insurance company suggested. This lawsuit eventually lead to a decision by the California court of Appeals to open up another option that consumers could sue their insurers under. It is expected that there will be an increase in the number of consumer protection lawsuits filed against California insurers as a result.

There have been plenty of situations where someone chose to sue his or her insurance company. The laws regarding this might be different from one state to the next. In California, there is something called the Unfair Insurance Practices Act. If I am understanding correctly, this Act basically prevents people from being able to file a lawsuit against their insurance company.

Instead, the California Insurance Code gives the state insurance commissioner the legal power to pursue matters relating to the types of things that a person would want to sue their insurance company about. This would include a variety of matters: situations where an insurer misrepresented the coverage or benefits of its policies, instances where the insurer delayed the claims process, or times when an insurer advised a customer who had a claim against seeking legal action.

A recently decided lawsuit changed things. A man named Chris Hughes had auto insurance from the Progressive Group of Insurance Companies. His vehicle was involved in a car wreck on August 15, 2005. Hughes wanted to have the repairs done at a specific repair shop that he selected. This repair shop was not one that was included in Progressive’s Direct Repair Program (DRP).

What happened next was that an attendant informed Hughes that his claim for car repairs would get approved more easily if he had those repairs done at a nearby facility that was a part of the DRP program. In short, this means that Progressive steered a customer to a repair facility that the insurer favored. This is prohibited by law.

Chris Hughes filed a lawsuit against the Progressive Direct Insurance Company for its failure to notify customers, (like himself), about their right to select the repair shop that their vehicle would be repaired at. The lawsuit was filed as a civil action as an individual, and also as a proposed class (of people who also could have experienced similar circumstances). The claim was filed under California’s Unfair Competition Law (UCL), instead of the Unfair Insurance Practices Act.

A panel of three judges decided that Chris Hughes was within his rights to sue Progressive. There is a law in the California Insurance Code that bars insurance companies from requiring or recommending that a customer use a specific auto repair shop unless that customer is informed in writing about their state-given right to select their own repair dealer.

Even without that specific law, the judges decided that there wasn’t anything barring a customer from suing an insurer under the Unfair Insurance Practices Act. This could potentially “open the floodgates” and cause an increase in the number of lawsuits filed against insurance companies in California from this point on.

Image by Craig Dennis on Flickr

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