What To Do If Your Car Insurance Claim Is Denied

Suppose you purchase car insurance and pay your premiums. In that case, you likely believe you have some protection and coverage against a possible accident or personal injury. What happens when you file a claim but your insurer refuses coverage?

This article discusses how to handle a bad faith car insurance denial. After explaining what a bad faith denial is, it examines the laws that address that behavior from insurance companies. It finishes up with a discussion of what types of damages you may be able to recover as the result of a bad faith denial.

What Is a Bad Faith Denial?

A bad faith insurance claim denial arises when an insurer seeks to avoid meeting its obligations to you, the insured. By agreeing to provide insurance, an insurer assumes specific duties toward you as the insured. An insurance company is required to act in good faith. In the context of a car insurance claim denial, bad faith can consist of the following:

• Improper investigation of the accident
• Improper valuation of property
• Refusal to pay on your valid claim

A bad faith insurance claim denial can be fought. There are usually two kinds of legal actions available to counter their denial:

• Breach of Contract – In nearly all cases, a bad faith insurance claim denial results in a cause of action for breach of contract. When an insurer fails to live up to a promise made in your policy, this is known as breach of contract. By denying your car accident claim, your insurer has broken its promise to cover you in the event of an accident.
• Tort – A tort, in this context, is a civil wrong. By refusing to pay a valid claim, your insurer has breached its duty to you, resulting in economic injury.

Although the analysis is similar in both kinds of claims, tort claims may provide access to a broader variety of damages. The legal actions and damages available depend on your jurisdiction.

Overview of the Appeals Process

If you receive a denial letter from your insurance adjuster and you want to appeal the denial, you’ll need to take several steps. Consider taking the following actions:

• Review your insurance policy (including policy limits) and your policy’s denial notice
• Ask your claims adjuster for more information about the basis for the denial
• Gather evidence and document the denial of your claim, including things like your police report from the time of the accident
• Make a final demand requesting coverage for your claim
• File a complaint with your state’s Department of Insurance
• If necessary, initiate a lawsuit (this might include hiring a lawyer well-versed in car accidents and bad faith denials)

Where You Live Matters

Your rights in court depend on your jurisdiction’s approach to bad faith insurance denials. All car insurance claims are subject to the laws of a particular jurisdiction. In this case, the laws of your state of residence apply.

States have different approaches to dealing with bad faith insurance denials. Some states have laws explicitly forbidding bad faith insurance denials, while others have a tradition of permitting this type of claim through case law, which is known as common law. The distinction determines whether your state’s lawbooks or case law describes the rights and limitations applicable to your case.

What You Can Recover

Jurisdictions may also differ in the kinds of damages available to you. Your jurisdiction might provide the right to claim one or more of the following:

• Compensatory Damages – These damages are intended to remedy your insurer’s bad faith insurance claim denial
• Consequential Damages – These damages compensate you for reasonably foreseeable expenses and injuries occurring as a result of the insurer’s bad faith insurance claim denial
• Punitive Damages – These damages seek to punish the insurer for the egregious nature of a bad faith insurance claim denial
• Attorney’s Fees – Recovery of the costs of litigation is usually only available when expressly provided by your jurisdiction’s laws

These types of potential damages are intended to keep insurance companies from shirking their responsibility to their policyholders. 

Learn More About Bad Faith Car Insurance Claim Denials

If your car insurance company has denied your car insurance claim, you might need additional guidance as a policyholder. Contact a bad faith insurance attorney for legal advice. Navigating the aftermath of an auto accident, including medical treatment and the accompanying medical bills, is hard enough. A car accident lawyer can help you navigate the claims process and ensure you get the most out of your auto insurance coverage and your auto insurance policy after a denied claim. Some attorneys even offer a free case evaluation.