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Insurance Companies Denying Smaller Motor Vehicle Wreck Cases

carwreck1.JPG I have noticed a trend in the last couple of years regarding smaller auto wreck claims. Usually, these auto wreck claims involve no personal injuries, but a person's vehicle is damaged in the car wreck. The car's damage might be minor and the car is still drivable after the wreck, or sometimes the car is totaled out as a result of the collision. Liability in the wreck is clear: the person was stopped at a stop light or at a stop sign, or maybe parked in a parking lot, and a negligent driver ran into them. Law enforcement will place the fault of the wreck on the other driver. Sometimes, the negligent driver will even admit that the car wreck was completely his fault.

But, even though liability is clear, the at-fault driver's insurance company denies the claim anyway. Citing "contributory negligence", "coverage issues", or no reason at all, more and more insurance companies are simply refusing to pay smaller auto wreck claims. The accident victim is then left to file the claim on their own insurance if they have collision (incurring a deductible and possibly a rate increase), or pay for the damages to their vehicle out of their own pocket.

Why is this happening?

Smaller motor vehicle wreck cases (those that have property only damages and are under $5,000 in value), are economically difficult for an attorney to take on a contingency basis. To fight an insurance company who refuses to pay, the attorney must expend a considerable amount of time drafting a lawsuit, obtaining service on the defendant, engaging in discovery, and then having a trial. On average, even the smallest of cases that go to trial take a minimum of 30 hours of attorney time. If the contingency fee was 1/3, on a $5,000, the fee would be $1666, which equates to an hourly rate of about $55 per hour. Subtract filing fees and service fees (a couple hundred dollars), and that rate goes down to about $30 per hour. Subtract other expenses (support staff, rent, insurance, supplies, etc.), and the attorney actually loses money. Therefore, most attorneys are not willing to take a case where they know the best case scenario will be that they will lose money.

Without the threat of a lawsuit to keep them honest, some insurance companies have decided to simply deny smaller claims, despite the fact that the law says that they must pay the claims. If there is no way to enforce the law, less ethical insurance companies will simply ignore it and save millions of dollars by refusing to pay for wrecked vehicles.

The law in North Carolina recognized this problem and provided a mechanism to incentivize attorneys to handle smaller cases and punish insurance companies for unwarranted denials on small claims. NCGS 6-21.1 allowed for attorney fees where insurance companies unreasonably refused to settle small claims. Thus, the law made it economical for attorneys to represent smaller car wreck cases. Insurance companies, knowing this fact, usually paid accident victims before legal services were required.

Unfortunately, in 2011, the N.C. General Assembly amended NCGS 6-21.1. They changed the law to allow insurance companies to escape this attorney fee provision as long as they offered a reasonable amount 90 days before trial. Litigation can take a year or longer, and the insurance company might fight tooth and nail, causing the attorney and her client to incur many needless hours of work and needless expenses, up until the last moment. Then, as long as the Insurance Company offered something reasonable in the final stretch of the case, attorney fees are now off the table. The law also capped the amount of attorney's fees that a judge could award, regardless of how much time was involved in fighting the case. Given these changes to the law, some less ethical insurance companies will intentionally run up expenses and time. As a result of these changes in the law, fewer and fewer attorneys will take the risk of handling smaller cases.

Fighting Back in Small Claims Court

If an insurance company refuses to pay a smaller claim and liability is clear, the accident victim is not without remedies. If an attorney cannot take the case, the accident victim can file a claim in small claims court. Small claims court is designed for persons who do not have attorneys to represent themselves. The filing fee is currently $96 and service on a defendant through the sheriff is currently $30. Small claims is limited to claims worth under $10,000. A guide to small claims court can be found at https://www.ncdoj.gov/getdoc/906abea4-5cb8-4d71-b014-522fa8a27806/Citizens-Guide-to-Small-Claims-Court-Josh-Stein-1.aspx.

Filing a small claims actions can help convince an insurance company to pay smaller claims, as they must then incur the cost of hiring an attorney to defend the action. An accident victim should use this route only if they do not have personal injuries from the wreck, however, as those claims tend to be more complicated and an experienced lawyer is usually necessary in personal injury cases.

There is a three (3) year statute of limitations in NC on negligence claims, which includes car wrecks, so the case must be filed or settled within three (3) years of the car wreck.

Find Out How We Can Help Today!

When you have been injured by someone else's carelessness or negligence, you want help. Dealing with doctors, insurers, lawyers and courts can be overwhelming at a time when you are hurt and simply want to feel better again.

That's where Ruth can help. She understands claims' procedures, court filing deadlines and what you need to do to begin your recovery and protect your rights. Call for a free initial consultation at 828-782-3832 or use our convenient online form and we will get in touch with you. While based in Asheville, Ruth Smith serves clients across North Carolina and South Carolina.

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