The short answer is: absolutely not. Insurance companies are only looking out for themselves. They want to bring in premiums, and not pay out claims. And – shocker – they also don’t care too much about protecting their insureds (you!).
In almost 99% of personal injury cases, the attorneys for the injured claimant(s) are only looking to recover the insurance policy limits. They will make demands for it, and often times the insurer will negotiate within it, or pay the limits when it’s applicable. However, there are times when the insurer tries to get cute and offer less than YOUR policy limits when making an offer (to save money, or for the insurance adjuster to get a raise). When it does this, YOU (the insured) become personally liable for the exposure over your policy – and – get this – you now have a right to sue your insurance company for the damage it caused you. This includes the amount you are now responsible for over your policy plus any other harms because they did this. Including punitive damages.
So, when an insurance company wants you to file bankruptcy, it’s probably because they screwed up on their end and trying to protect themselves. Don’t fall for it. Here are five reasons why an automobile insurance company should not give such advice:
First, bankruptcy is a serious decision that should only be made after careful consideration of all available options. It has long-term financial consequences, including a negative impact on the individual’s credit score and ability to obtain credit in the future.
Second, advising an insured to file for bankruptcy could be seen as a conflict of interest. The insurance company has a duty to protect its own interests, which may not align with the insured’s best interests. By suggesting bankruptcy, the insurance company may be attempting to avoid liability for the full amount of damages owed.
Third, filing for bankruptcy may not discharge the debt owed to the third party in all cases. If the damages were caused by the insured’s willful or malicious conduct, the debt may not be discharged in bankruptcy.
Fourth, the insurance company should explore other options to resolve the debt before advising the insured to file for bankruptcy. For example, the company could negotiate a settlement with the third party or agree to pay the debt in installments.
Fifth, advising an insured to file for bankruptcy could damage the insurance company’s reputation and relationships with customers. If the public perceives the company as unethical or untrustworthy, it could lead to a loss of business and revenue.
In conclusion, an automobile insurance company should not advise its insured to file for bankruptcy because it is a serious decision that could have long-term consequences, may be seen as a conflict of interest, may not discharge the debt owed in all cases, other options should be explored first, and could damage the company’s reputation. Instead, the company should work with the insured and third party to find a solution that is fair and equitable for all parties involved.
If you think your insurance company is giving your bad advice, feel free to reach out to us. Even if our firm represents the person you injured in a car crash, you can assign your right to sue your carrier, so you do not have any exposure at all.