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UPDATED: Mar 13, 2020
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Most of the time, when you file a car insurance claim, the insurance company will review the information to make sure that they can cover the loss. Most car accidents and other losses that you file will be covered by the insurance company, and your claim should quickly be handled. Sometimes, however, this is not the case, and an insurance company will issue a denial instead of settling the claim.
A denied claim can be alarming for the insured, and if it catches you by surprise, you may find yourself in financial trouble as you scramble to pay the damages yourself. It’s a good idea to understand how your car insurance works before filing a claim so that you won’t be caught off-guard by a denied claim. If you do happen to have a claim denied, there are some things you can do to make the next steps easier.
Why Car Insurance Claims Get Denied
There are two main reasons why an insurance claim will be denied: Either the appropriate coverages do not apply to the case, or the insured’s behavior negated the policy agreement. Here are a few examples of common claim denials:
1.) The Insurance Company is Not Liable for the Damage
These denials are made to the third party who files a claim against them and are probably the most common claim denials. If a person’s insurance company determines that they are not at fault for an auto accident, they will deny the claim made by all third parties claiming damage. At this point, the third party must either pursue a claim with their own insurance company in order to pay for their repairs.
2.) The Insured does not have the Necessary Coverage to Pay for the Damage
This happens frequently when the insured driver files a claim for repairs to his or her own vehicle but they do not have first-party insurance coverages. For example, if you are in a single-car accident and do not have collision coverage, your insurance company will deny the claim due to lack of coverage. Similarly, if you do not carry comprehensive coverage, your insurance company will not pay to replace a stolen vehicle.
3.) The Insured Violated the Policy Guidelines
Some insurance policies are sold with specific exclusions. For example, a particular driver may be excluded from the policy. If that person drives the vehicle and is involved in an accident with it, the insurance company will deny the claim as that person is excluded from coverage. This also applies when a policy excludes certain perils from coverage, or when the insured is behaving illegally at the time of the loss.
4.) The Loss does not apply to the Policy Coverage
These types of denials occur whenever a claim is reported that has loss facts that don’t match the covered perils on a policy. For example, if you attempt to file a claim for a maintenance issue, your insurance company will not be able to cover these costs because the damage is not caused by an accident or other covered loss.
5.) Insurance Fraud was committed
If the insurance company believes that the insured was guilty of committing fraud, they will deny the claim. They may also levy legal charges against the insured and cancel the insurance policy. Fraudulent claims could include misrepresenting the loss or lying about the date that damage occurred.
What to Do if Your Claim is Denied
Whenever an insurance company denies a claim, they will issue an official denial letter detailing how the company came to this conclusion and where to direct any complaints. At this point, you will need to carefully review the situation to see if their determination was correct.
In many cases, although the denial may be upsetting, the insurance company is correct: You may not have had the correct coverage, liability may not have been in your favor or you may have acted in a way that goes against the policy agreement. In these situations, you must accept the denial and make alternative plans for handling your damages.
In other cases, the insurance company’s determination may be incorrect. You may dispute the liability determination, or you might have purchased coverages that aren’t listed on the policy. In this case, it’s within your rights to dispute the claim denial. In order to do this, you should contact the insurance company and state your case; make sure that you speak to a supervisor whenever possible so that that you can register your complaint with someone who will have the power to help you.
Once a complaint has been filed, it will go to the insurance company for review, and they will assess their actions and investigation for any errors. If this does not overturn the denial, you may need to file a complaint with the Department of Insurance. You may also wish to file a lawsuit if the situation is very severe.
If you feel that you have been mistreated by your insurance company or the claim was unfairly denied, you should contact a legal professional specializing in insurance law. The attorney will be able to review your specific situation and see whether the claim was unfairly denied and what options you have for handling the situation.