Car insurance is probably one of those things you hope you never need. But when you end up falling back on the coverage you paid for (often for years) after a car accident, you’re hoping to get help with all relevant losses. But what if the auto insurance company denies your claim? In this article, we’ll discuss why claim denials can occur, your options (as a policyholder and when filing a claim with someone else’s insurer), and more. (Get the basics on how car insurance coverage works.)
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why auto insurance companies deny claims?
A claim denial can be in whole or in part (the latter occurs when the insurer pays a portion of your claim). Simply put, auto insurance companies deny claims when they believe they have a contractual or legal right to do so. in other words, they believe that all or part of the claim is invalid. Common reasons for claim denial include:
Reading: Car insurance claim denial what next
- claimant is not covered by auto insurance policy.
- the vehicle was not listed on the auto insurance policy
- there was no policy in force at the time of the accident (common when premiums are not paid or the policy is not renewed
- claim exceeds policy limits
- the automobile insurance company’s investigation related to the fault of the automobile accident resulted in the conclusion that there is no applicable coverage
- claimant was driving without a license or under the influence of a substance at the time of the accident
- claimed injuries were pre-existing or claimed vehicle damage was not related to the auto accident
- the auto insurance policy doesn’t cover what’s in the claim (without comprehensive coverage, you can’t make a claim for damages when a tree falls on your parked car, for example)
- did not immediately report the accident to the automobile insurance company, and
- Lied to the insurance company when applying for coverage or during the claims process.
- have no-fault auto insurance
- you are filing a claim under your “personal injury protection” or “medical payments” coverage
- were responsible for causing the accident, or
- the at-fault driver had no insurance.
- refuse to pay a legitimate claim
- failure to reasonably investigate a claim
- not provide any reason to deny a claim
- knowingly deviate from state regulations related to the claims process, and
- deliberately ignore information that would support a valid claim.
In the above situations, the auto insurance company may have correctly denied the claim, but any of these types of denials could also be wrong or premature. If an auto insurance company denies your claim, your next steps will depend on the type of claim you filed and the basis for the denial.
types of auto insurance claims
If you are in a car accident, you will file either a first party claim or a third party claim.
A first party claim is a claim you file with your own auto insurance company. You will typically file a first party claim when:
A third-party claim is one you file with another driver’s auto insurance company. You can file a third party claim when you believe the other driver is responsible for causing the accident.
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One of the key differences between these two claims is that, all things being equal, first-party claims are less likely to receive a denial. This is because you have a legal contract with your car insurance company that requires you to fulfill the obligations outlined in your car insurance policy. Put another way, this makes it the primary legal obligation of the auto insurance company. Additionally, most states have special laws that dictate how auto insurance companies must handle claims from their own policyholders.
In contrast, there is no contract when you file a third-party claim. therefore, the auto insurance company’s primary legal obligation is to its own policyholder, not to you.
what to do if your claim is denied
The exact process will vary, depending on what state you’re in and whether you’re filing a first- or third-party claim.
If your first party claim is denied, the first thing you should do is get the basis for the denial in writing. Most auto insurance companies will automatically prepare a letter outlining their reasons for denying the claim. If you are not provided with this letter, be sure to ask for it.
Based on the reasons given in the letter, you may provide additional evidence to support your claim. This could include a police report, photos of the accident, repair estimates, or medical bills.
Next, consider filing an appeal or requesting an appraisal from your auto insurance company. Your insurance policy will describe how this process is done.
Finally, if you find yourself in a situation where you think there’s nothing else you can do, you may want to bring in an outside party. This could include filing a complaint with your state insurance commissioner, hiring an independent claims adjuster, or consulting with an attorney.
If your third party claim is denied, then your options will be similar to those discussed above. One key difference is that depending on the type of auto insurance coverage you have, you may have the option to file a first-party claim with your own auto insurance company.
bad faith auto insurance claim denials
If there’s a car insurance claim denial, it’s likely a genuine mistake by the car insurance company or there’s a legitimate question about liability or damages. but in limited cases, the insurance company may knowingly deny a valid claim. If this happens, it could constitute a bad faith insurance denial.
States tend to vary in how they define bad faith in insurance, but it generally refers to an insurance company’s unwarranted refusal to provide a benefit under an insurance policy. this can potentially include:
People can bring an insurance claim in bad faith against their own auto insurance company or against another. however, when you sue another auto insurance company for their bad faith denial of your third-party claim, you will have to prove more egregious conduct, such as that the auto insurance company engaged in fraud in handling your claim.
If an insurance company denies a claim in bad faith, it could be liable for consequential and punitive damages.
If you think an auto insurance company has improperly denied your claim, it might make sense to discuss your options with a car accident attorney.