Insurance claims gone bad: Why you were denied and what you can do to appeal
If you were in a car accident, one of your main concerns is probably how your insurance company is going to handle your claim.
You might feel like the settlement you’ve been offered isn’t enough to fully compensate for what you’ve been through — medical treatments, lost time from work, a totaled or damaged car, and then some. It might not be exactly what you hoped for, but it might be all the insurance company can do — at least that’s what they’ll tell you.
Each insurer has a variety of financial databases, tables, and calculators that it uses to determine what your injury is “worth.” There might be a legitimate reason why your claim might be denied, or there might be a completely phony excuse for why your claim isn’t covered.
Understand this:
The insurance company doesn’t have the final word on what you recover after an accident. If you’re dissatisfied with a settlement offer, you don’t have to accept it. Once you accept an offer, you can’t go back and ask for more. But you can call a personal injury lawyer who’ll evaluate your case and tell you if you’re entitled to more than you’re being offered.
If your lawyer thinks the insurance company isn’t treating you fairly, it could be a case of insurance bad faith. Insurance bad faith is when the insurer refuses to pay your claim without good reason, or when the insurer doesn’t investigate the claim in a reasonable amount of time.
Reasons why your insurance claim might be denied
For the most part, your insurance company probably wants to make you feel satisfied with the outcome of your claim. After all, you’re the customer. You pay premiums to have insurance, and you can certainly take your business elsewhere.
But the insurance company is also motivated to make a profit, and the way that happens is by paying out as little as possible for each claim filed.
Here are some common reasons why insurance claims are denied:
1. You were partially or wholly at fault for the accident
It’s important to understand the terms of your policy contract with your insurance company. If you were engaged in behavior that would void your coverage, your insurance company isn’t required to pay your claim.
For example, drunk driving almost always voids insurance coverage, or if the accident occurred when an unlicensed driver was using your car with your permission. If you were at fault for something that was in the terms of your insurance policy, the company won’t pay.
If you were breaking the law at the time of the accident, your insurance company can refuse to pay. In addition to drunk driving, this might be an issue if you were texting or otherwise using your phone in a state where that’s prohibited.
But it’s not just about intentional wrongs. If there are other ways that you could’ve avoided the crash, the insurance company might refuse to pay a claim.
2. You didn’t receive a medical evaluation
If you were in an accident, it’s crucial to seek a medical evaluation immediately. Some injuries don’t appear until days or weeks after an accident. Without an immediate evaluation of your condition, it could be hard to prove that your injuries were the result of the crash.
Most people who are seriously injured in a crash go straight to a hospital or doctor. It’s important that the hospital staff indicate in your medical records that you’re injuries were because of a motor vehicle accident.
If you wait too long to have an injury diagnosed and documented, the insurer can dispute whether it happened in the crash. If you can’t prove that an injury is the result of the crash, the insurer could refuse to pay for treatment.
Accident Report Form
Sample post-accident report form to keep in your glove box - fill out at the scene or as soon as you can after a car accident
Download in PDF format
3. You don’t have a diagnosed injury
An accident might leave you feeling frightened and shaken, but if a doctor doesn’t find a diagnosable injury, then you likely can’t claim an insurance payout for medical treatment. Insurance is for the purpose of paying your financial expenses from an accident — for instance, you might experience whiplash or mild back pain after an accident — but if there’s no medical treatment, you can’t recover from insurance for that.
If you have a pre-existing condition, it might be difficult to prove to the insurance company that a subsequent injury was from the accident. It’s possible for an accident to aggravate or worsen a condition, but it will be hard to determine if a condition existed before the accident or was caused as a result of the accident in question.
4. The claim exceeds your maximum coverage
It’s important to make sure your policy matches or exceeds your needs. For example, if your car is worth $100,000, what if you have an accident with a driver who only has $50,000 in coverage? If that happens, your claim could be denied unless you have uninsured motorist coverage.
If the damages you suffer exceed your own automotive policy limits, then either your claim will be paid up to your policy limits or the insurance company could deny the claim.
Liability coverage is the bare minimum coverage you can have in order to drive your car. You might need comprehensive or collision coverage in addition to the basic liability. It’s an extra expense to have to pay insurance premiums, but adding coverage for the unexpected can save you a lot of money in the event of an accident.
You should think twice the next time your friend or family member asks:
“My car’s in the shop. Can I borrow yours to go to work today?”
Even your best friend can become a liability depending on if they’re covered by your auto insurance policy. A driver outside your household might be covered under some circumstances:
- Your insurance policy should include every licensed driver in your household who’s going to drive your car. If you’ve given anyone else permission to drive your car and they get into an accident, your auto insurance should cover it. The other driver’s own insurance, if they have it, would be the secondary coverage. If the person driving your car is at fault, expect that your premium rate could increase.
- If the person driving your car isn’t at fault, the other driver’s insurance should cover the costs and your insurance shouldn’t be affected.
- If the person driving your car is a licensed driver but doesn’t have insurance (in other words, they don’t own a car that has insurance), you would be liable for the damages. If the accident costs exceed the limit of your insurance, the injured parties could sue you personally for damages.
5. There’s a liability dispute
If there’s a question as to which driver caused the accident, the insurance companies might not be able to agree on whose responsibility it is to pay out the claims (yours and the other driver’s).
If your insurance company believes you didn’t cause the accident, it will say that the other driver’s insurance is responsible for the claim. If the other driver’s insurance says you’re responsible and your insurance should pay, you could be at an impasse.
6. You didn’t notify your insurance company quickly enough
You have a responsibility to notify your insurance company after a crash. There are definite do’s and don’ts about how to talk to your insurance company following an accident. However, you always need to report that an accident happened to your insurer.
If your insurance company isn’t notified in a timely manner, it could claim that it didn’t have the opportunity to investigate the claim while the evidence was still valid.
When is an insurance claim denial made in bad faith?
Bad faith means the insurance company is denying your claim for reasons that aren’t valid and that are probably unethical. A bad faith lawsuit is based on breach of contract. Your insurance policy is a contract between you and the insurance company.
Your policy might be pages long, and full of small print and legal terms. But it boils down to this fact:
You pay an established premium in exchange for your insurer agreeing to provide coverage for your losses in certain situations.
| Types of insurance bad faith | |
|---|---|
| First-party bad faith
This is when the insurance company refuses to pay a claim without a reasonable basis or doesn’t properly investigate the claim in a timely manner. |
Third-party bad faith
Your insurance company has a responsibility to act as your “defense” if a claim is made against you. |
| Example:
Your car is parked in a shopping center parking lot. When you finish shopping, you come out of the store and see the damage to your car but the driver who hit it is gone. There are no witnesses or security cameras, so you have no way to track down the other driver and make a claim against their insurance. You file a police report. Your insurance company denies your claim without giving a reason. |
Example:
You’re in a car accident where you rear-ended the other car. Your insurance is obligated to pay for your damages and the other driver’s damages because you were at fault. You have collision insurance and the damage amount is within that limit. However, your insurance company refuses to pay for your liability in the crash, and now you’re being sued by the other driver. |
Insurance bad faith is a denial of payment by your insurance company when there’s no legitimate reason to do so. Bad faith is also when the insurer makes the process so slow and burdensome that you can’t move forward, effectively blocking a payout.
If suspect this is happening to you, an insurance bad faith attorney is your key to relief. A bad faith lawsuit can help you recover damages that include not just what the policy would’ve covered, but also interest, emotional distress, consequential economic losses, attorney fees, and punitive damages.
Browse the Enjuris Personal Injury Lawyer Directory to find an insurance bad faith lawyer near you and see if you have a case.
See our guide Choosing a personal injury attorney.