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.
Common explanations for denial of insurance injury claims -- at least from the insurer's perspective -- include:
(See Delay & Deny: How Insurance Companies Minimize Injury Claim Payments to learn more about how an insurance company might dispute an injury claim.)
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.
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.