Don’t assume your own car insurance company will treat you fairly. See why your insurer might deny your claim and what you can do about it.
Your insurance company is supposed to protect your interests. Despite this obligation, they may put their bottom line ahead of your needs. The more money they pay out on insurance claims, the less profit they make.
Claims adjusters are pros at finding reasons to deny auto accident claims. They might say the denial is due to policy definitions or exclusions, or accuse you of breaking the notification clause, or say the collision doesn’t qualify under your uninsured motorist coverage.
Sometimes, auto insurance companies cross the line by acting in bad faith when denying your claim. No matter the situation, you have rights under state laws and your insurance contract.
5 Reasons Why Your Insurance Company Might Deny Your Claim:
- Insurance Policy Definitions
- Insurance Policy Exclusions
- Uninsured Coverage Restrictions
- Notice and Cooperation Clauses
- Bad Faith Insurance Practices
An auto insurance policy is a legal contract between you and the insurance company. They’re often intentionally confusing to the policyholder for the benefit of insurance companies.
If your insurer denies your claim, they must provide you with a reason. Insurance companies sometimes unfairly use their policy definitions as a reason for denying a claim.
Your car insurance policy coverage is summarized on the declarations page. Your “dec page” contains general information about your policy, such as whom it covers, what it covers, and what you need to do to file a claim. Here you’ll also find your policy limits, what types of property or risks are covered, and the policy’s effective dates.
The nitty-gritty contract language is in the actual policy. Most insurance policies are several pages, including a definitions section that goes over the key terms you’ll find in the document.
How the insurance company interprets and applies these crucial terms could result in an unfair denial of your claim.
For example, most auto policies insure the policyholder and resident relatives. How the policy defines “resident relative” may not be what you think it means.
Case Example: Marital Separation Impacts Resident Relative Definition
Ryan and Amanda Collins owned a Jeep and a motorcycle at the time of their separation. Amanda kept the Jeep and Ryan took the motorcycle when he moved out of the family home in January 2013. Ryan moved in with friends, but never changed his mailing address or the address on his driver’s license until 2014.
Amanda continued to pay the auto insurance premiums until February 2013, when she purchased a new policy from Geico to cover the Jeep. Amanda told the insurance agent that she and Ryan were separated, and she did not consider him a member of her household.
In May 2013, before the divorce was final, Ryan was involved in a motorcycle accident caused by an underinsured motorist. He filed an underinsured motorist claim with Geico. Ryan asserted that because they were still married at the time of his motorcycle accident and because he had not established another residence, he was entitled to coverage under Amanda’s auto policy.
Ryan’s underinsured motorist claim was denied by Geico. Both Ryan and Geico filed suit, asking the District Court to determine coverage.
The District Court found that Geico had properly denied coverage to Ryan, because Ryan was not a member of Amanda’s household. The decision was upheld on appeal.
Most standard automobile insurance liability policies, including no-fault policies, have what are called “Exclusions.”
Exclusions are conditions in which your policy won’t provide coverage, such as the “household” or “family exclusion” which generally means your family members can’t file a liability claim against your insurance company when you’re the at-fault driver in a crash.
Depending on your policy, exclusions might include:
- Injuries suffered while driving a company vehicle, or your own vehicle while using it for commercial purposes
- Damage or bodily injury you intentionally directed someone else to cause
- Specific motor vehicles or classes of vehicles
- Car accidents that happen outside of the United States
- A “named driver” exclusion, usually a household member with a poor driving record
If your car insurance company denies your claim based on policy exclusions, you have the right to know why. Examine your policy’s exclusions section so that you can better understand what’s not covered.
Sometimes insurance companies claim an exclusion that you won’t find listed in your policy, or the adjuster’s explanation of the exclusion doesn’t sound right to you.
If your case goes to court, sections of an insurance policy that are vague are typically decided in favor of the policyholder, not the insurance carrier.
Almost all jurisdictions in the United States require motorists to carry no less than the state’s minimum liability coverage. However, not every driver complies with this legal requirement.
Even when a driver does have insurance, the minimum required liability amounts often don’t cover all of an accident victim’s losses.
Suppose you’re in an accident with a driver who doesn’t have insurance or whose policy limits won’t cover all of your damages. In that case, you can file a claim on the uninsured/underinsured motorist portion of your policy. Depending on your state’s laws, this coverage may be offered or required on all auto insurance policies.
Uninsured Motorist Coverage (UM)
There are 22 jurisdictions that require UM bodily injury coverage. If you have Uninsured Motorist Coverage, it can help pay for your damages if you’re hit by a driver who doesn’t have insurance.
Instead of filing a third-party claim with the at-fault driver’s insurance company, you’ll file a first-party UM claim with your own insurance carrier.
You can also use uninsured motorist coverage if you’re involved in a hit-and-run accident. However, most insurers will deny your UM claim without testimony from an “arms-length” witness. In other words, you need a witness who has no prior connection with you to verify that the “phantom driver” really hit you and took off.
Underinsured Motorist Coverage (UIM)
Underinsured Motorist Coverage can help cover your damages if you are injured by a driver who has insurance coverage, but not enough to cover all of your losses.
Suppose you were in a car accident in California with a driver who only had the minimum liability coverage of $15,000. Your medical bills totaled $25,000. You could file a third-party claim up to their $15,000 policy limit and then file a first-party claim under your UIM for the remaining $10,000.
Lawsuits against insurance companies often involve bad faith claim denials or low settlement offers on UM/UIM claims. Sometimes insurers will try to escape their financial liability by saying that the at-fault driver’s insurance covers all of your damages. This really means they’re disputing the full amount of your claimed losses.
If you believe your insurance company is unfairly denying or devaluing your UM/UIM claim, you might want to explore your legal options to ensure you receive a fair settlement for your damages.
Common reasons underinsured motorist claims are denied include:
- You failed to provide notice of the accident within a reasonable time
- The policy doesn’t include this type of coverage
- The policy lapsed before the accident
- The at-fault driver’s liability insurance covers the entire value of your claim
- You failed to provide evidence supporting the value of your claim
Insurance companies sometimes dispute coverage by saying the claimant violated their policy’s Notice and Cooperation Clause. They can use this supposed violation as a reason to deny your injury claim or cancel your coverage.
Nearly every auto insurance policy has a “Notification and Cooperation” clause. The clause means you agree to tell the insurance company when you’re involved in an accident, even if it wasn’t your fault. You also agree to cooperate with their investigation of the accident.
A typical notification clause has language similar to this:
“Insured (you) agrees to notify the insurer (your insurance company) of any accidents and thereafter comply with all information, assistance, and cooperation which the insurer reasonably requests, and agrees that in the event of a claim the insurer and the insured will do nothing that shall prejudice the insurer’s position…”
As the insured driver, the notice and cooperation clause requires you to:
- Tell your insurance company you were in an accident
- Provide information necessary for your claim’s investigation
- Do what the insurance company requests in defense of the claim
- Attend related hearings and trials, as needed
- Avoid doing anything that could jeopardize the insurer’s position
Any claim on your own policy, such as comprehensive coverage, could be denied if you fail to promptly report the accident. Your insurer could say that your delay in telling them about the collision lost them the opportunity to recover funds from other parties.
Each state regulates the insurance industry under its own laws. In general, state laws say that insurance companies must use good faith and fair dealing with all claims, no matter the location or type of claim.
If your insurer doesn’t follow your state’s insurance statutes and handles your claim in bad faith, you could sue them.
Another option is to file a complaint with your state’s Department of Insurance.
Examples of bad faith practices:
- Forcing the policyholder to file a lawsuit to get fair compensation
- Failing to provide an explanation for denying your claim
- Failing to make a prompt settlement of claims when liability is clear
- Denying claims without performing a reasonable investigation
- Failing to use realistic standards to investigate a claim
- Altering your policy after you file a car insurance claim
Proving bad faith usually requires you to show that:
- You didn’t receive the benefits that you were entitled to under your policy. You must prove that your claim was valid under the terms of your insurance policy and that the insurer denied it anyways.
- Your benefits were withheld unreasonably. You could have a valid reason to sue your insurer if it didn’t factually assess the circumstances of your claim.
Large insurance companies have an unfair advantage over their policyholders. Confusing policy language and laws make it easy to take advantage of claimants throughout the claims process.
But you can use insurance laws to your advantage to fight claim denials, or even sue your insurance company if they’re not upholding their end of the bargain.
When your third-party claim is denied, meaning a claim filed with the other driver’s insurance company, you have to fight to get paid. You will have the same type of fight on your hands if your first-party claim (filed with your own carrier) is denied. The insurance company won’t be any easier on you just because you bought your policy from them.
If your insurance provider denies your auto insurance claim, it’s in your best interest to contact a personal injury attorney. Most attorneys offer free consultations to accident victims.
An attorney can examine your claim and the actions of your insurance company. If they believe the company unfairly denied your claim or otherwise acted in bad faith, they can help you assert your rights.
If you decide to hire a lawyer, most work on a contingency fee basis. If and when you receive compensation, they’ll collect their fees from the proceeds. If they don’t obtain money on your behalf, you owe them nothing.
Don’t walk away after an insurance claim denial without exploring your legal options.
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