The Difference Between First and Third Party Claims
Most states have laws that distinguish between first party insurance claims and third party insurance claims - Oklahoma law is no different. Insurance is a type of contract between an individual and a corporation which protects the individual under certain circumstances, such as driver negligence. The terms first party and third party arise from contract language.
Third Party Claims
There are three parties to a third party insurance claim: the insurance company, the insured or policyholder, and the person who was injured by the insured. A third party claim is made by the injured person against the insurance company under the policy held by the person who caused the injury. Therefore, there is no direct contract between the insurance company and the injured person (i.e., the third party). However, when the insured commits negligence, the injured person can make claims under the insurance policy for things such as medical expenses, lost wages, and compensation for pain and suffering. As another person is liable for these damages to the injured person, this type of third party claim is commonly called a liability claim.
First Party Claims
A first party insurance claim is a claim of the insured against their own insurance company. These are directly contractual claims based on specific language of the insurance policy or contract between the two parties. A good example of a first party claim is a homeowner’s claim for hail damage to their roof or for property damage under their automobile policy. In these instances, the policy holder will make a claim with the insurance company to cover the cost to repair the damage. The insurance company will compensate the homeowner according to the terms of the insurance policy, although not always voluntarily.
Filing Suit on a Claim
Whether you have a first party or third party claim, you can file a lawsuit if and when the insurance company does not agree to pay everything they are required to by law. Typically a first party claim is held to a higher standard than a third party claim because it is based on the principals of contract law. Specifically, insurance companies are held to the standard of “good faith and fair dealing”. A first party claimant can allege “bad faith” as a cause of action in a lawsuit, which may entitle them to compensation beyond what is outlined in their insurance policy or contract with the insurance company.
As always, if you have any questions regarding any potential first party or third party claim, please call our office for a free consultation.