When the Insurance Company Denies Your Injury Claim

Some reasons why your injury claim would be denied, and what you can do about it.

Insurance can provide peace of mind to people who purchase it to cover injuries in car accidents, at a homeowner's residence, at a business, or in the event of disability. However, after an actual injury occurs, an insurance company may deny coverage for the injury.

In many situations, the injured person may be confused and frustrated over the seemingly unreasonable denial of his or her claim. Premiums may have been paid for years and, when insurance is finally needed, the insurance company unsympathetically issues a broad denial. But the denial of coverage is not necessarily the last word on the matter. Insurance injury denials can be contested and the insurance company can be held legally accountable for unreasonable denials. Read on to learn more.

Why Your Injury Claim Would Be Denied

 Common explanations for denial of insurance injury claims -- at least from the insurer's perspective -- include:

  • Policy Exclusion. Certain types of injuries are intentionally excluded from insurance policies. These exclusions are often hidden in fine print, and certain exclusions may even be illegal. There are many cases where denials of coverage are based on a technicality that is briefly and vaguely described in the policy.
  • Expiration or Lapse of Coverage. Insurance policy holders sometimes neglect to renew various types of coverage, and coverage is not automatically extended or renewed in most cases. The insured will usually be out of luck for injuries and losses that occur beyond the expiration date.
  • Incorrect or Incomplete Claim. The person submitting the claim may enter incorrect information, or may fail to comply with claim submission requirements. Simple mistakes may cause a complete denial of a claim. It is always best to do a thorough investigation into a claim denial.
  • Delay in Treatment. The insurance company may deny a claim because an allegedly injured person did not seek immediate treatment or make an immediate complaint.
  • Limited or No Medical Records. Without medical records, the insurance company may claim that there was no injury at all. With incomplete records, they may also deny the claim.
  • Preexisting Condition. The insurance company may claim that the injury did not occur on the date of the alleged accident, but is attributable to some preexisting injury or health problem.
  • Failure to Avoid/Mitigate Injury. Injury claims can be denied based on the injured party's failure to avoid the injury or failure to act reasonably to avoid making it worse. For example, someone who is injured in a car accident but waits a number of weeks before seeking treatment, and then blows off a series of crucial follow up treatments, could be said to have failed to mitigate the injury, and insurance coverage could be denied on that basis.

(See Delay & Deny: How Insurance Companies Minimize Injury Claim Payments to learn more about how an insurance company might dispute an injury claim.)

Options after Injury Coverage Denial

An insurance company owes the insured a duty to act in good faith. An insurance company may breach this duty by failing to investigate a claim, failing to negotiate a settlement, and unwarranted denial of injury claims. In the context of unwarranted denial of injury claims, it is advisable to first study the insurance policy and then contact the insurance company. If the insurance company does not provide a valid explanation of the denial and the insured has suffered a significant injury, it may be appropriate to contact a personal injury attorney. Many personal injury attorneys offer a free consultation and will be able to explain whether the insured has a strong case against the insurance company.

Causes of Action Against Insurance Company: Breach of Contract and Bad Faith

Basic Terminology. It is important to understand the basic terminology of a case against an insurance company. A claim against the insured's own insurance company is called a first-party claim. A claim against the insurance company of the person or business that caused the injury is called a third-party claim.

Breach of Contract. By signing the insurance policy, the insured enters into a contract with the insurance company. A wrongful denial of a claim is a breach of the contract. The insurance company breached the contract by not doing something it contracted to do -- pay for valid claims made under the policy. In these cases, the words of the policy are closely examined. If it is determined that the insurance company breached the contract, the insured will be compensated for the injury claim and may be awarded expenses or "damages" caused by the denial.

Bad Faith. An insurance company engages in "bad faith" when it breaches its duty to treat insured people in a fair and reasonable manner. For example, where it is established that the insurance company failed to investigate an injury claim, or wrongfully refused to defend a covered individual in a lawsuit, or wrongfully failed to pay out a valid claim, there may be an action for bad faith. In a bad faith claim, the insurance company may be liable for fraud or intentional infliction of emotional distress, and the injured party may recover punitive damages.

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