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Denied Auto Insurance Claims: How to Fight Back

Why Did My Auto Insurance Claim Get Denied?

Each insurer may have a unique reason for denying a claim but claim denials usually fall into three categories: 

  • Policy Non-Compliance: You did not follow the rules of your policy
  • Violation of the Law: You violated state or federal law
  • Fraud Prevention: The insurer suspects your claim is fraudulent 

Luckily, if your claim is denied, there is an appeal process that policyholders can take advantage of.

Remember: an insurance adjuster‘s primary goal is to save the company money. If injured in a car accident, you may be able to claim medical bills, lost wages, or pain and suffering. However, there isn’t a fixed formula for calculating that amount, so getting an attorney’s advice may be wise. 

How Often Do Car Insurance Claims Get Denied? 

According to recent studies, claim denials are the third-most common reason for closed consumer insurance complaints. State law usually requires the insurer to tell you in writing why your claim or part of your claim was denied. 

Insurers can deny claims for various reasons, including for something as simple as not filing your claim in time or not having the right coverage. 

For example, imagine a scenario where you were injured in an accident that was your fault. If you have personal injury protection (PIP), your claim for an ER visit’s costs might be covered. But if your car was damaged and you don’t have collision insurance, your insurance may not cover repairs. 

How Does Claim Denial Work?

Claim denial happens when you’ve filed a claim for damages—such as medical bills, repairs, or other damage—but your insurance company or the other driver’s insurance company denies the claim.

The Three Main Reasons for Claim Denial

The three main reasons for claim denial are policy non-compliance, violation of the law, and fraud prevention. With each, the insurance company may deny your claim fairly; read on to find out more.  

Policy Non-compliance 

Your insurance policy lays out terms or conditions you must meet for the policy’s purposes. Often, these terms form an agreed-upon contract that protects both parties from unfair claims. 

Common ways in which insurers may deny a claim may include, but are not limited to, the following:

  • Lapsed Policy: You didn’t pay your policy premium and are no longer covered by insurance.
  • Policy doesn’t cover the claim: You didn’t opt to include the type of coverage that pays for the damage.
  • Policy doesn’t cover the vehicle: For example, you had a new car you didn’t tell your insurer about. 
  • Policy doesn’t cover the driver: Your spouse got into an accident but was never added to your policy.
  • Other non-compliance: For example, policies could refuse to cover claims occurring when you were using your car for ride-sharing or delivery services or because you permanently repaired the damage before it could be inspected.

Violation of the Law 

Insurers may deny claims based on policyholders violating laws. Your insurer may deny your claim if you’re committing crimes, driving recklessly, or driving without a proper license or registration. 

Common denial reasons include but aren’t limited to:

  • Using the car to commit a felony or other crime, even if not charged or convicted
  • Driving without a license or registration
  • Driving while intoxicated or under the influence 

In 23 states, insurers may reject injury claims suffered due to driving under the influence of alcohol and drugs. But this is determined by state law; some states prohibit insurance companies from excluding coverage in this way

Fraud Prevention 

Insurers may deny a claim in an attempt to prevent insurance fraud. According to 2022 statistics, insurance professionals suspect up to 20% of all claim types may involve fraud

Common red flags that could cause your insurer to deny your claim include the following:

  • Intentional damage to file a claim and get money
  • You didn’t immediately file a claim or report the accident or seek medical attention
  • You gave incorrect or misleading information while filing a claim
  • You gave incorrect information when you first applied for insurance

The insurer relies on your provision of all drivers’ accurate license and driving history, vehicles to be insured and where garaged, and where you live. Misleading an insurer about these elements could make your policy voided overall and the claim denied. 

First and Third-Party Claims

Making a claim against your insurance is called a first-party claim. You’ll contact your insurance company’s representative for coverage that applies, such as collision, comprehensive, uninsured motorist coverage, personal injury protection (PIP), and medical payment coverage. However, in no-fault states, all claims are usually first made with your own insurer, no matter who is at fault. 

Making a claim against another person’s insurance is a third-party claim. You might make this claim if someone else is at fault for the accident and damages due to negligence. Likewise, another driver can make a third-party claim against your insurance if you were at fault. 

If it’s unclear who was at fault, insurers will work out responsibility for the claims between them based on the statements of the drivers involved, police reports, and other information. You may disagree with the assessments made, however. 

What Is a Bad Faith Claim Denial? 

A bad faith claim denial is when you’ve suffered a loss, but your company handles your compensation claim unreasonably. If you’re unreasonably denied a claim, you may have to take legal action to get your claim covered. However, “unreasonable” may be somewhat subjective. 

State laws tell insurers and claims adjusters what to do when the insured property is damaged and a policyholder files a claim. Companies are required to know and abide by these laws, but “some companies and adjusters routinely ignore or violate these laws when handling claims.” 

For this reason, review your state’s requirements for paperwork, claims responses, responses in general, and information you must give your insurer and your insurer must provide you. 

How To Reverse a Claim Denial

Reversing a claim denial isn’t certain or easy. But your best chance to get your claim approved relies on understanding your policy and the denial reason, collecting your evidence, and submitting an appeal. 

Understand The Reason For Denial

First, make sure you get the denial reason in writing. Your confusion about the denial may be because you interpret your policy differently than your insurance company. So ask your insurer to point to any policy language that led to the rejection.

If you’re still confused, let your agent or insurance representative know you’re unhappy with the claims experience. Ask them to explain in everyday language why the claim was denied. If your claim was denied due to missing paperwork or documentation, this is a chance to provide that information. 

Review Your Policy 

First, review your policy to determine if the reason for denial is legitimate. You’ll want to review closely: 

  • Your coverage: Some claims are only covered by specific coverage. For example, you can’t get repaid to repair damage from an uninsured motorist if you don’t have uninsured motorist coverage.
  • Coverage limits: Most coverages have a reimbursement limit that affects how much you can claim from either your insurance or the at-fault driver’s insurance.  
  • Deductibles: Your payment portion before coverage kicks in for collision and comprehensive claims—you’ll need to pay this to get your comprehensive or collision claim covered.
  • Exclusions and conditions: Your policy likely outlines situations where you won’t get reimbursed for a claim. For example, if you were racing your car, your damage may not be covered. These exclusions can differ by coverage type.

Understanding legal language in insurance contracts can be complex, and state law governs most insurance contracts and companies. If necessary, consult with a lawyer or free legal aid for your state.

Gather Proof 

If you feel the claim denial reasons were illegitimate, begin preparing to launch an appeal. You’ll need documentation or other evidence to do so. The documentation necessary to fight a claim denial may include but may not be limited to the following:

  • Police report: Documentation of the situation and fault 
  • Witness statements: Witnesses to support who was at fault
  • Medical records and bills: Evidence of your accident-related injuries and amounts spent on recovery, post-accident
  • Repair estimates: Evidence of the cost to repair auto damage 
  • Photos and videos: Photo evidence of damage or the situation

Include your claim number and contact information on any documentation you prepare to submit to your insurer.

Submit an Appeal 

In general, you should first consult with an attorney before submitting an appeal. But if you want to attempt to do so on your own, try following these steps: 

  1. Contact your insurer and ask how you dispute the claim denial or otherwise appeal the denial. Ask how you should present documentation for an appeal (email, letter, or online tool) and the timeline for a response in advance, which may vary by insurer or state. 
  2. You may need to write a letter with any new or relevant facts of the case and send copies (not originals) of any evidence or proof you’ve gathered since your initial claim. 
  3. Keep detailed track of all communications with your insurer, including phone calls, emails, and mail. For phone conversations, track the number you called, names of people you spoke to, date and time of call, and a brief conversation summary. 

Consider Alternative Resolutions

Your policy will describe various methods of resolving your claims. For example, most companies offer arbitration or appraisal services to settle claim differences and disputes. You can also contact an independent arbitrator to see if your claim experience is typical or fair. 

In no-fault insurance states like New York, requesting arbitration after a claim denial is routine. However, 99% of claims are brought by medical professionals who offer treatment to injured parties. In New York, a smooth arbitration-request process also exists when a claim denial involves uninsured or underinsured motorist damages

What To Do If Your Claim Is Still Denied 

The process for fighting an auto insurance claim denial may vary by state, insurer, and situation. 

If you think you’ve been wrongfully denied, you might first consider filing a complaint if your insurance company violates state law or your policy’s terms. If unsure of your options, check in with an experienced attorney.

First, review your contract, state insurance code, and any other law that applies to insurance claims. For example, your state or insurer may have a time limitation for filing a lawsuit.

Depending on your state and situation, your causes of action may include but aren’t limited to:

  • Breach of contract: When the insurer doesn’t follow your auto policy’s obligations
  • Insurance code: If the insurer is being unreasonable 
  • Misrepresentation of coverage: You must show that you reasonably relied upon but were misled by an insurer’s words or conduct, which led to harm.
  • Other causes: Intentional fraud or other claims

Seek a qualified lawyer with good references. This lawyer should have plentiful experience in suing insurance companies in your state. However, the process can take years; almost 90% of lawsuits resolve before trial.

File A Complaint 

You can file a complaint with the state insurance department regulating insurance companies, agents, and adjusters. An insurance regulator will help advocate for you if your insurance company violates state law and policy terms. You can use NAIC’s tool to find your state’s insurance department.

What a regulator can do is limited. For example, in Texas, the insurance regulator cannot typically decide who was at fault in an accident, make the other driver’s insurance company pay your claim, or even make your insurance company pay its claim unless it’s violating your contract’s terms or state law. 

However, your success may depend on where you live. Washington’s State Office of the Insurance Commissioner notes that it investigates more than 5,400 insurance-related complaints annually and recovers $800,000 monthly for Washington consumers. 

Putting It All Together

This information on fighting an auto insurance claim denial is for general informational purposes and is not legal advice. Many factors can lead to a claim denial, and it’s hard to guess why any denial occurs without the specifics involved. 

For legal advice, consult an attorney knowledgeable in state insurance law and auto insurance claims. Your state insurance department can also help you review your policy and options if your claim is denied. 

With research and documentation, you may better understand why your claim was denied—and, with luck, successfully fight the denial. If you were denied due to incorrect or low-limit coverage, now is an excellent time to add coverage. If you had a bad experience with the claims-denial process, now might also be an ideal time to shop for new auto insurance. 

Find an auto insurance policy that meets your needs.

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Find an auto insurance policy that meets your needs.

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