A serious injury followed by an insurance claim denial can be a devastating chain of events. Unless an injury claim is very minimal or trivial, a claim denial should not be ignored. The post-denial process should start with reviewing the insurance policy and the denial language and it may need to end with legal action against the insurance company. Bottom line: you have viable legal options after an insurance injury claim is denied, and this article looks at a few of those options.
Carefully Review the Policy and the Denial
The first step after an insurance injury claim denial is to review the insurance policy and the language in the claim denial. The policy may contain exclusions. Your insurance policy may be voluminous and the exclusions may be hidden in the middle of the document in small print. The reason for denial may be that the claimed injury was expressly excluded from coverage by the policy. In reviewing the policy, focus on the language of the denial and look for the applicable provision in the policy. (More about common reasons for injury claim denial.)
Send a Letter Disputing the Denial or Requesting More Information
If the denial contains a mistake, is ambiguous, or contains false or misleading information, write a letter to the insurance company disputing the insurance injury claim denial. The insurance policy should contain an address and/or fax number that accepts dispute letters. Keep the letter detailed and concise. Describe how the denial is erroneous.
Certain insurance policies may contain a provision requiring arbitration or other dispute-resolution services. Before attending arbitration or other dispute resolution forums, it is best to consult with an attorney. Arbitration may not be required and, in any case, an insured should not attend arbitration without an attorney.
Pursuing Legal Action Against the Insurance Company
If the insurance company does not respond to a dispute letter or provides an unsatisfactory response, it is advisable to consult a personal injury attorney. Consulting an attorney during the process of reviewing the policy and sending the dispute letter is also a good idea. Where there is a substantial injury, it is helpful to have an experienced attorney to review the policy for any issues and write a strong letter to the insurance company.
Many personal injury attorneys will provide a free consultation and can evaluate the strength of a case against an insurance company. Many states allow attorneys to take cases against an insurance company on a pure contingency basis. This means that the attorney will not charge the client for any attorney's fees and, in exchange, the attorney will receive a percentage of the money recovered from the insurance company. In many cases, the percentage will be 33%. It is important to note that most law firms will still require the client to pay for expenses and court costs including filing fees and costs in obtaining medical records.
An insurance company owes the insured person a duty to act in good faith. A insurance company breaches this duty when it fails to investigate a claim, fails to negotiation a settlement, or unreasonably denies an injury claim.
Causes of Action Against Insurance Company: Breach of Contract and Bad Faith
Now we'll take a look at two potential legal remedies based on an insurance company's denial of an injury claim: a breach of contract lawsuit, and a "bad faith" action. (A note on terminology: A claim against the insured person's own insurance company is a first-party claim. A claim against the insurance company of the individual or business that caused the injury is a third-party claim.)
Breach of Contract. By signing an insurance policy, the insured person enters into a contract with that insurance company. A wrongful denial of a claim is grounds for a breach of the contract lawsuit. The insurance company breached the contract by not doing something it contracted to do -- pay valid claims after a qualifying loss. 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 reasonable and fair manner. For example, where it is established that the insurance company failed to investigate an injury claim or purposely denied a valid claim, there is Bad Faith. In a Bad Faith claim, the insurance company may be liable for intentional infliction of emotional distress or fraud, and the injured party may recover punitive damages.