Denied An Auto Insurance Claim? Here's What To Do

If your auto insurance company denies your claim, it's important to understand the reason for the denial before taking any next steps. Your claim could be denied because your policy has lapsed, you don't have enough coverage, or for other reasons. Understanding the reason for the denial will help you decide on the best course of action to take. In some cases, you may be able to appeal the decision or seek legal assistance.

Reasons for denial: lapsed insurance, lack of coverage, policy exclusions, etc

When an auto insurance company denies a claim, they are usually obliged to send a claim denial letter outlining the reasons for the denial. There are several reasons why a claim might be denied, and understanding these reasons is the first step in determining the validity of the denial and deciding on a course of action.

Lapsed Insurance Policy

One common reason for a denied claim is a lapse in insurance coverage. This can happen when an individual fails to pay their insurance premium on time, resulting in a lack of active coverage at the time of the accident. It is important to pay insurance premiums on time to avoid such situations.

Lack of Coverage

Even if an individual has an active insurance policy, their claim may still be denied if they lack the necessary coverage for the specific incident. For example, if an individual cancels their comprehensive coverage and then needs to make a claim for damage caused by a fallen tree, their insurer will likely deny the claim. It is crucial to carefully consider the different types of coverage offered and choose the ones that best suit one's needs.

Policy Exclusions

Insurance policies often have specific exclusions, such as "acts of God" or natural events. If an insurer believes that the accident was caused by an excluded event rather than the negligence of another party, they may deny the claim. For instance, if a sudden hailstorm is deemed the cause of an accident, the insurer may deny the claim based on an "act of God" exclusion.

Other Reasons

Other reasons for claim denials include exceeding policy limits, breaking the law, and avoidable accidents. Additionally, insurers may deny claims if they suspect fraud, such as not reporting the accident immediately or not seeking prompt medical attention.

Claimants can appeal the decision and submit additional evidence

If your auto insurance claim is denied, you can appeal the decision. The first step is to understand the reason for the denial. Denials often occur due to stipulations in your policy that you may not have been aware of. Understanding the reason for the denial can help you navigate the situation and prepare your next steps.

Some of the reasons your claim may be denied include:

• The event does not meet the definition of a covered loss.
• There has been a violation of your contract.
• Your insurer suspects fraud.
• An excluded driver was driving.

If you think your car insurance claim has been unfairly denied, you can submit an appeal. Most insurance companies have a process in place for you to contest a denied claim. Here are some steps to consider:

Gather Evidence

Review any documentation provided by the insurance company and gather any evidence you need to appeal. This could include police reports, eyewitness information, photographs, medical reports, and other supporting evidence. Make copies of everything to provide to the insurance company so that you can keep the originals.

Draft an Appeal Letter

This letter will explain why you disagree with the insurance company's decision. Make sure you clarify why each piece of information was provided, such as any police reports. Provide as much detail as possible, referencing policy information and the claims denial letter as needed.

Consider Hiring an Attorney

If you are uncomfortable taking these steps or want an expert's opinion, consider hiring an attorney. They can review the case and supporting documents to draft a demand letter requiring the insurance company to respond and defend its claim denial. While this may cost you money upfront, it could be a worthwhile expense to have the claim denial overturned if you feel your insurer made the wrong decision.

Understand the Claim Denial Letter

Understanding the claim denial letter and why an auto insurance company decided not to make a payout is the first step in determining the validity of a denied car insurance claim. Most instances of auto claims denials are valid, but others may not be. In this case, appealing the insurance company's decision can get the decision reversed or an offer made to cover the damages.

Claimants can hire an attorney to help with the appeal

When an auto insurance company denies a claim, claimants can hire an attorney to help with the appeal. This is not a necessary step, but it can be beneficial, especially if the denial was made over a simple omission on the initial application. An attorney can help to submit a reconsideration appeal and represent the claimant at a disability hearing.

The appeals process can be complex, and an attorney can provide valuable expertise and guidance. They can review the case and supporting documents, draft a demand letter, and negotiate with the insurance company on behalf of the claimant. This can increase the chances of a successful appeal and help claimants avoid the stress and hassle of navigating the legal system on their own.

In some cases, hiring an attorney may be essential, especially if the claimant feels that the insurance company is acting in bad faith. Bad faith practices by an insurance company can include unreasonable delays in handling the claim, denying a claim without a valid reason, or failing to conduct a fair and thorough investigation into the accident. An attorney can help to file a bad faith claim and seek additional damages beyond what was initially claimed.

It is important to note that hiring an attorney may come with financial constraints. However, in some cases, attorneys work on a contingent fee basis, meaning they only receive payment if the client's case is successful. It is essential to consider the potential costs and benefits of hiring an attorney before making a decision.

Denials can occur due to stipulations in the policy that the claimant was unaware of

When an auto insurance company denies a claim, it will send a claim denial letter outlining the factors that led to the decision. Denials can occur for a variety of reasons, including lapsed insurance policies, inadequate coverage, policy exclusions, and suspected fraud. Another common reason for claim denials is exceeding policy limits, where the claim amount exceeds the coverage limits.

Denials can also occur due to stipulations in the policy that the claimant was unaware of. These stipulations can include specific definitions of what constitutes a covered loss, violations of the insurance contract, and excluded drivers. For example, if a car is used for ride-hailing work, which is often an excluded purpose, any damage incurred may not be covered. Similarly, if a driver was previously excluded from the insurance policy but was allowed to drive, any claims for damage they caused may be denied.

It is important to carefully review the denial letter and understand the specific reasons for the denial before taking any next steps or considering an appeal. Speaking with an insurance broker, agent, or claim representative can help clarify the details of the denial and policy restrictions. In some cases, claimants may suspect that the insurer engaged in improper claims practices or acted in bad faith, and seeking legal advice from an experienced attorney can be a necessary step to protect their rights and explore their options.

Bad faith insurance denial: when an insurance company knowingly denies a valid claim

When an auto insurance company denies a claim, it can be for a variety of reasons. Sometimes, the denial is justified, but there are instances when an insurance company denies a valid claim, which is known as acting in "bad faith".

Bad Faith Insurance Denial

Bad faith insurance refers to an insurer's attempt to renege on its obligations to its clients, either by refusing to pay a policyholder's legitimate claim or by failing to investigate and process a claim within a reasonable period. Insurance companies act in bad faith when they misrepresent an insurance contract's language to the policyholder to avoid paying a claim. They also act in bad faith when they fail to disclose policy limitations and exclusions to policyholders before they purchase a policy or when they make unreasonable demands on the policyholder to prove a covered loss.

State laws that specifically address bad faith practices, also called unfair claims practices acts, are meant to protect consumers against malicious behaviours by insurance companies. Some laws require an insurance company acting in bad faith to pay basic damages to compensate the victim for having a claim denied, beyond the amount owed under the claim. This compensation covers not only out-of-pocket expenses or borrowed funds to address damage but also missed work and attorney's fees.

If an insurance company acts particularly egregiously, a jury may award punitive damages to the policyholder to punish the insurance company and to discourage it from acting in bad faith with other policyholders.

Examples of Bad Faith Insurance Claims

• Claiming Non-Coverage: This happens when the insurance company states that the policyholder is not covered for their submitted damages when they actually are.
• Making Offers Below a Claim's Worth: Insurance companies often provide a low settlement offer, significantly below what their clients are entitled to receive.
• Refusal to Provide Reasons for Denial: Some companies do not share the reasons why claims were denied. Policyholders have the right to know.
• Using Biased Experts: Insurance companies sometimes bring in their own "experts" to determine the value of a claim. These experts are often paid by the insurance company and look for ways to justify offering unfair settlements or denying claims.
• Threatening Legal Action: Policyholders have the right to submit claims for their losses. If an insurance company representative makes threatening statements regarding legal action, they are acting in bad faith.
• Delaying the Process: Insurance companies sometimes slow down the claims process, knowing that many individuals will either walk away or accept less than they should receive.

What to Do if Your Claim is Denied

If you believe your insurance company is acting in bad faith, you should question the insurance company's decision in writing and demand that they also put their position on your claim in writing. If you believe your insurer is being unfair or dishonest, you should consult a lawyer who can help you determine if you have a case and how to proceed.

Frequently asked questions