Understanding Wrongful Denials
When an insurance company denies your claim, it must provide a legitimate reason based on your policy language. However, insurers often stretch, misinterpret, or outright fabricate reasons to avoid paying valid claims. Recognizing these tactics is the first step toward holding your insurer accountable.
A wrongful denial may constitute "bad faith" - a legal term meaning the insurer breached its duty to deal fairly and honestly with you. Bad faith claims can result in damages beyond your original claim amount, including emotional distress and punitive damages.
California Insurance Code Section 790.03(h) specifically prohibits "unfair claims settlement practices," including denying claims without conducting a reasonable investigation. California policyholders have strong protections under the Fair Claims Settlement Practices Regulations (Cal. Code Regs. tit. 10, Section 2695.1 et seq.).
The 12 Most Common Denial Tactics
1 Misquoting Policy Language
The insurer cites policy language out of context or emphasizes exclusions while ignoring provisions that provide coverage. Always request the specific policy section they're relying on and read it in full context.
2 Claiming Pre-Existing Damage
The insurer argues your damage existed before the covered event. Combat this with photos, maintenance records, inspection reports, and witness statements documenting the property's condition before the loss.
3 Failure to Investigate
The insurer denies your claim without conducting a thorough investigation. This is one of the clearest forms of bad faith. Insurers must investigate claims before denying them - not just deny and see if you push back.
4 Missing the Deadline Excuse
The insurer claims you filed too late, even when you met all deadlines. Keep records of every submission date, use certified mail or email for documentation, and note that insurers often must prove prejudice from late filing.
Under California law (Cal. Code Regs. tit. 10, Section 2695.7), insurers must acknowledge receipt of your claim within 15 days and accept or deny it within 40 days. If they need more time, they must explain why in writing.
5 Application Misrepresentation
The insurer claims you made misrepresentations on your application and voids your policy entirely. However, most states require the misrepresentation to be "material" - meaning it would have changed the insurer's decision.
6 The "Not Covered" Blanket Denial
A vague denial letter stating your loss "is not covered" without citing specific policy language. This is insufficient under most state laws. Demand a detailed explanation citing exact policy provisions.
7 Improper Use of Exclusions
Insurance policies contain exclusions, but insurers often apply them too broadly. Remember: exclusions must be interpreted narrowly, and ambiguous language is typically construed in your favor.
8 Requesting Excessive Documentation
Insurers sometimes request unreasonable amounts of documentation hoping you'll give up or miss a deadline. While you must cooperate, requests should be reasonable and related to your claim.
9 Hired Gun "Experts"
The insurer hires biased experts who consistently find in favor of denials. These "independent" engineers, doctors, or appraisers may have financial incentives to support the insurer's position.
10 Claiming Policy Lapse
The insurer claims your policy lapsed due to non-payment, even when you have evidence of timely payments. Keep all payment records and bank statements showing premium withdrawals.
11 The Rescission Threat
The insurer threatens to rescind (cancel from the beginning) your policy based on alleged application fraud. This is often a pressure tactic to get you to accept a lower settlement. Rescission has strict legal requirements.
12 Blaming You for the Loss
The insurer claims your own actions caused or contributed to the loss in a way that voids coverage. While policies do have conditions about maintaining property, insurers often stretch these beyond their proper scope.
How to Fight Back Against Wrongful Denials
Step 1: Request a Complete Copy of Your Policy
You are entitled to a complete copy of your insurance policy, including all endorsements and declarations pages. Don't rely on the insurer's summary of what's covered.
Step 2: Get the Denial in Writing
Request a detailed written explanation of the denial, including the specific policy language being relied upon. In many states, insurers must provide this upon request.
Step 3: Document Everything
Keep a detailed log of all communications with your insurer. Note dates, times, names of representatives, and what was discussed. Follow up phone calls with written confirmation.
After every phone conversation with your insurer, send an email summarizing what was discussed. This creates a written record they cannot later deny.
Step 4: File an Internal Appeal
Most policies allow you to appeal a denial. Submit a detailed appeal letter addressing each reason for denial with supporting documentation. This also preserves your rights for later legal action.
Step 5: Consider Outside Help
If your appeal is denied, consider hiring a public adjuster (for property claims) or consulting with an insurance bad faith attorney. Many attorneys offer free initial consultations for insurance disputes.
When Denial Tactics Become Bad Faith
Not every denial is bad faith - sometimes claims legitimately aren't covered. However, a denial may cross into bad faith territory when the insurer:
- Denies without conducting a reasonable investigation
- Misrepresents policy language to avoid coverage
- Fails to promptly communicate reasons for denial
- Refuses to pay an undisputed portion of a claim
- Uses biased experts to manufacture denial reasons
- Forces you to litigation on claims that should clearly be paid
- Threatens rescission without proper grounds
You have limited time to pursue bad faith claims. In most states, the deadline is 2-4 years from the wrongful conduct, but this varies. Don't wait to seek legal advice if you believe your insurer acted in bad faith.
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