What to Do If Your Business Insurance Claim is Denied
Created by FindLaw's team of legal writers and editors | Last reviewed January 13, 2017
Business involves a lot of risks. Some of these risks can be mitigated by purchasing insurance that covers your business, its property, and your customers against different kinds of injury. When a business insurance claim is denied you may find yourself exposed to precisely the sort of risk you acquired the insurance to avoid in the first place. The following article explores some of your considerations and options when your business insurance claim is denied.
Preparing a Response
The first step when your business insurance claim is denied is to review the notice of denial to determine the specific reasons for the refusal of coverage. There are many different reasons an insurer may seek to deny a claim. Denials are frequently issued where:
- The claim was not timely
- The injury was not covered by the insurance policy
- The insurer suspects fraud
- Coverage limits are met or exceeded
While preparing a response, it is also important to carefully review your insurance policy in light of the reason given for your business insurance claim denial. Your policy will indicate what sort of incidents are covered, policy limits, claims procedures, and many other aspects of your insurance coverage.
You can then prepare an appeal letter that clearly illustrates your best arguments for coverage in light of the terms of your insurance policy and the facts of your situation. You can and should present any additional evidence that supports your arguments at this time.
The insurer may reverse its business insurance claim denial, or stand by its original decision. If the insurer still refuses to pay your claim, you may need to sue the company in civil court.
Business Insurance Claim Denial: Litigation
An insurer that refuses to pay a legitimate claim can be sued in civil court. Insurance is a kind of contract, and the failure of an insurer to perform its end of the agreement will generally amount to a breach of contract. In addition to this cause of action, some jurisdictions also permit litigants to sue for the bad faith denial of insurance claims as a kind of tort.
Not all insurance claim denials involve bad faith. Bad faith refers to situations in which the insurer has not denied the claim on account of a legitimate belief that the claim is invalid. Instead, bad faith business insurance claim denials occur when the insurer lies, ignores evidence, refuses to investigate, or otherwise intentionally seeks to frustrate the insured's attempts to receive the benefit of the insurance policy they purchased. A tort claim can be very attractive since, unlike breach of contract claims, tort actions may permit the insured to seek punitive damages, which can often exceed the value of the policy itself.
Discuss Your Business Insurance Claim Denial with a Lawyer
Business insurance claims denials raise many questions regarding the terms of your insurance policy and your particular jurisdiction's options when it comes to litigation. A successful businessperson knows that it can be helpful to contract with a specialist when complicated technical issues arise, and this may be such a situation. If your business insurance claim has been denied a bad faith insurance attorney can help determine how best to proceed.
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