Insurance Claims: Can They Be Undone?

After a car accident, you can file an insurance claim with your own insurance company (a first-party claim) or with the other driver's insurance company (a third-party claim). In rare cases, an insurance company can drop you after a claim if you have a pattern of causing accidents, filing excessive claims, or not paying your premium on time. However, they must provide notice before doing so and it is more likely that your insurance premium will increase after a claim.

First-party claims vs. third-party claims

A first-party insurance claim is filed directly with your insurance company for damages or losses. This type of claim typically covers incidents affecting you or your property. For example, if you damage your car by backing into a pole, you would file a claim with your own insurance company, which would be a first-party insurance claim. Your insurance company will then look at your policy to determine whether you carry the type of coverage needed for them to compensate you for the particular type of loss.

A third-party insurance claim is filed with someone else's insurance provider, usually after an incident where you are not at fault. This claim is filed against the insurance of the party responsible for the damages or injuries suffered. For example, if a drunk driver runs a red light and collides with your vehicle, you will likely file a claim with the drunk driver's insurance company. In this case, the driver's insurance company would be responsible for your damages.

In a third-party insurance claim, there are three parties: the insured individual, the insurance company, and another individual. The third party is another individual who is not the policyholder or the insurance company. The most common type of third-party insurance claim is a liability claim. For example, if you cause an accident and injure a passenger in another vehicle, that passenger can be a third party who files a claim against your insurance company.

In a first-party claim, the policyholder (the first party) interacts directly with the insurance company (the second party). These are contractual claims that are contingent on the specific language of the insurance policy. For example, a homeowner who suffers fire damage to their home would make a first-party claim with the insurance company to cover the damage and repairs. The insurance company will compensate the homeowner according to what is in the insurance policy.

It is important to note that insurance laws differ with regard to first and third-party claims, so it is crucial to understand your rights and duties in both cases. In a first-party claim, you have a direct contract that requires your insurance company to fulfill all the conditions stated in your policy. In a third-party claim, you do not have a direct contract with the insurance company, and their primary obligation is to their own policyholder.

Insurance companies' obligations

When it comes to insurance companies' obligations, there are several factors to consider. Firstly, it is important to understand the different types of insurance claims: first-party claims and third-party claims. A first-party claim is filed with your own insurance company, with which you have a direct contract that requires them to fulfill the conditions stated in your policy. On the other hand, a third-party claim is filed with the other driver's insurance company, with whom you do not have a direct contract, and their primary obligation is to their own policyholder.

In the case of a first-party claim, the insurance company has a contractual obligation to fulfill the conditions stated in your policy. They are required to investigate your claim and offer a settlement if they determine that their insured is legally responsible for your injuries or damages. This process may take an extended period, especially if your injuries require extensive medical care. It is important to note that you have the right to choose your own repair shop, but you may have to pay the difference if it charges more than the company's suggested shop. Additionally, the insurance company may deduct a reasonable amount for unrepaired damage or rust on your vehicle.

In the case of a third-party claim, the insurance company's primary obligation is to their own policyholder. They will investigate your claim and determine whether their insured is legally responsible for the accident. They may also need to determine the extent of their financial obligation, as they may try to attribute a percentage of fault to you if you are found to be partially at fault. It is important to provide as much information as possible to substantiate your claim, as failing to cooperate fully may result in a denial of your claim.

Regardless of the type of claim, insurance companies have certain obligations to their customers. They must provide timely responses to claims, typically within a set number of days, and may need to request additional time for a more complex investigation. Insurance companies are also required to provide notice before cancelling or non-renewing a policy, and this timeframe varies by state. Additionally, insurance companies must adhere to specific coverage requirements, such as minimum liability coverage for bodily injury and property damage.

It is important to note that insurance companies are in the business of protecting their profits, and they may use various tactics to minimise payouts. They may try to shift the blame to you, dispute liability, or make lowball settlement offers. Therefore, it is crucial to understand your rights and obligations when dealing with insurance companies and to seek legal advice if needed.

Reasons for claim denial

Insurance companies deny claims for a variety of reasons. Here are some of the most common reasons for claim denial:

Lapsed Insurance Policy

If you fail to pay your insurance premium on time, your coverage may lapse, meaning you don't have an active policy to file a claim against. This can result in your claim being denied, and you may also face fines and penalties such as a suspension of your driver's license and vehicle registration, depending on your state.

Insufficient Coverage

The damage incurred may not be covered by your insurance policy, or you may have reached your coverage limit. It's important to review your policy to understand what is and isn't covered before filing a claim.

Uninsured Motorist

If you are in an accident with an uninsured motorist or a hit-and-run driver, your claim may be denied if you do not have uninsured or underinsured motorist coverage.

Avoidable Accident

If the insurance company determines that the accident could have been avoided, they may deny the claim. For example, if you allowed an unlicensed driver to operate your vehicle, the insurance company may deny the claim.

Late Claim

Insurance companies prefer that customers file claims as soon as possible after an accident. Some states have firm deadlines for making claims, which can range from one to 20 years. Filing a claim after the deadline may result in denial.

Delayed Medical Treatment

If you delay seeking medical treatment after an accident, the insurance company may become suspicious and investigate or deny your claim. It's important to seek medical attention promptly and provide documentation of your injuries.

Policy Exclusions

Your claim may be denied if it falls under any exclusions in your insurance policy. For example, if your policy excludes coverage for "acts of God" (natural events), and your accident was caused by a natural event like a hailstorm, the insurer may deny your claim.

Failure to Notify

Insurance policies typically have requirements for how soon an accident must be reported. If you do not notify the insurance company within the specified timeframe, your claim may be denied.

Driving Without a License or Under the Influence

If you were driving without a license or were intoxicated at the time of the accident, the insurance company may deny your claim.

Pre-existing Injuries or Unrelated Damage

If the insurance company determines that your injuries were pre-existing or that the damage to your vehicle was not caused by the accident, your claim may be denied.

Misrepresentation or Fraud

If the insurance company discovers that you lied or provided misleading information on your insurance application or during the claim process, they may deny your claim.

Appealing a denied claim

• Understand the reason for denial: When you receive a denial notice, contact your insurance company to clarify the reason for the denial. Ask any questions you have about the denial and gather all relevant information, including your policy details and the Summary of Benefits Coverage (SBC). Keep detailed records of your conversations with insurance representatives, including names, dates, and phone extensions.
• Review your policy: Familiarize yourself with the terms and conditions of your insurance policy to understand your coverage and benefits. This will help you identify if there are any discrepancies or errors in the denial of your claim.
• Gather supporting documentation: Collect all relevant medical records, such as x-rays, lab results, and letters from your physician explaining the medical necessity of your treatment. This evidence will be crucial in supporting your appeal.
• Submit a written appeal: Send a detailed letter to your insurance company, clearly stating that you are appealing the claim denial. Explain the reasons why your claim should be paid under your policy, providing as much detail as possible. Include all the supporting evidence you have gathered. Be sure to submit your appeal within the specified timelines, which are usually 30 days for treatment not yet received and 60 days for treatment already received.
• Request an expedited appeal if necessary: If there is a sense of urgency or if the denial of your claim could be life-threatening, ask your insurance company to expedite the appeal process. This can help speed up the review of your case.
• Seek external review: If your internal appeal is denied, you have the right to request an external review by an independent third party. This means that the final decision will no longer be made by your insurance company, providing an impartial perspective on your case.
• Consult with professionals: If you feel overwhelmed or unsure about the appeals process, consider seeking assistance from professionals such as a patient advocate, health insurance lawyer, or claims assistant. They can provide guidance and support throughout the process.
• Contact your state Department of Insurance: If you feel that your insurance company is not cooperating or if you have exhausted all other options, you can reach out to your state's Department of Insurance for help. They can provide additional support and ensure that your rights as a consumer are protected.

Remember, it's important to stay organized, persistent, and thorough throughout the appeals process. Keep detailed records of all communications and follow-up as needed. Don't be afraid to seek help if needed, as navigating insurance claims can be complex.

Insurance fraud

Fraudulent car accidents often occur in urban areas with a high volume of vehicles and in wealthier communities, as drivers are perceived to have better insurance. Criminals frequently target new, rental, or commercial vehicles, as well as women driving alone and senior citizens, as these drivers are thought to be less confrontational.

• The accident occurred soon after a vehicle was purchased or registered, or after comprehensive and collision coverage was added to the policy.
• There is no police report or only an over-the-counter report for an accident with multiple injuries and/or extensive damage.
• The claimant has a history of accidents within a short period.
• The claimant has no record of prior insurance for the recently damaged vehicle.
• The claimant's vehicle remains drivable despite extensive damage being claimed.
• The claimant prefers to send in photos of the damages that do not show license plates.
• The claimant's vehicle will not be repaired locally and will be shipped or driven out of state.
• All vehicles involved in the accident are taken to the same body repair shop.

If you suspect insurance fraud, it is important to report it to your insurance company as soon as possible.

Frequently asked questions