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First And Third Party Insurance Claims

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.

First Party Insurance Claims 

A first party insurance claim is between the insurance company and the policyholder. An example of a first party insurance claim would be a homeowner who suffers water 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 in accordance with the insurance policy language. Therefore, it is important for homeowners to make sure they know what is covered and excluded in their policy.

Third Party Insurance Claims 

A third party insurance claim is made by someone who is not the policyholder or the insurance company (the insurance company can be referred to as the second party). The most common type of third party insurance claim would be a liability claim. For example, if you are at fault for an accident on the highway and injure a passenger in another vehicle, that passenger 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. third party), the passenger is entitled to make claims outside the policy such as medical expenses, lost 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 reach a settlement with the injured third party, the third party can bring the liability claim to the tort system.

Bad Faith 

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 promptly acknowledge and reply to a claim
  • 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 in order to process a claim
  • Using harassing investigative methods to intimidate the claimant

Kovar Law Group will review any of your insurance policies for free.

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