What If My Car Insurance Claim Is Denied?

A car insurance company's claim denial isn't necessarily the end of the road when it comes to getting your car accident losses covered.

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  • Car insurance is likely one of those things you hope to never need. But when you do end up turning to the coverage you've paid for (often for years) after a car accident, you expect to get help with all relevant losses. But what if the car insurance company denies your claim? In this article, we'll discuss why claim denials might occur, your options (as both a policyholder and when making a claim with someone else's insurer) and more. (Get the basics on how car insurance coverage works.)

    Why Do Car Insurance Companies Deny Claims?

    A claim denial can be total or partial (the latter occurs when the insurer pays a portion of your claim). Simply put, car insurance companies deny claims when they believe they have a contractual or legal right to do so. In other words, they believe all or part of the claim is invalid.

    Common reasons for claim denial include:

    • the claimant is not covered under the car insurance policy.
    • the vehicle was not listed on the car insurance policy
    • there was no policy in effect at the time of the accident (common when premiums go unpaid or the policy isn't renewed
    • the claim exceeds policy limits
    • the car insurance company's investigation related to fault for the car accident resulted in a conclusion that there is no applicable coverage
    • the claimant was driving without a license or was under the influence of a substance at the time of the accident
    • claimed injuries were preexisting or claimed vehicle damage was unrelated to the car accident
    • the car insurance policy doesn't cover what's in the claim (without comprehensive coverage, you can't make a claim for damage when a tree falls on your parked car, for example)
    • you did not promptly report the accident to the car insurance company, and
    • you lied to the insurance company when applying for coverage or during the claim process.

    In the above situations, it's possible the car insurance company properly denied the claim, but any of these kinds of denials might also be erroneous or premature.

    If a car insurance company denies your claim, your next steps will depend on the type of claim you filed and the stated basis for the denial.

    Types of Car Insurance Claims

    If you get into 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 car insurance company. You will typically file a first-party claim when you:

    A third-party claim is one you file with another driver's car insurance company. You might file a third-party claim when you believe the other driver is responsible for causing the accident.

    One of the key differences between these two claims is, all else 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 it to fulfill the obligations outlined in your car insurance policy. Put another way, this makes you the car insurance company's primary legal obligation. Additionally, most states have special laws dictating how car insurance companies must handle claims from their own policyholders.

    In contrast, no contract exists when you file a third-party claim. Therefore, the car insurance company's primary legal obligation is to its own policyholder, not you.

    What to Do If Your Claim Gets 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 gets denied, the first thing you need to do is get the basis for the claim denial in writing. Most car insurance companies will automatically prepare a letter outlining their reasons for denying the claim. If they don't provide this letter, make sure you 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, pictures of the accident, repair estimates, or medical bills.

    Next, consider filing an appeal or asking for an appraisal from your car insurance company. Your insurance policy will describe how this process takes place.

    Finally, if you find yourself in a situation where you believe there's nothing else you can do, you may want to bring in an outside party. This might consist of filing a complaint with your state's 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 car insurance coverage you have, you could have the option to file a first-party claim with your own car insurance company.

    Bad Faith Car Insurance Claims Denials

    If there is a car insurance claim denial, it is probably either a genuine mistake by the car insurance company or there is legitimate doubt as to liability or damages. But in limited instances, the insurance company might knowingly deny a valid claim. If this happens, it could constitute a bad faith insurance denial.

    States tend to vary in how they define insurance bad faith, but it typically refers to an insurance company's unreasonably refusing to provide a benefit under an insurance policy. This can potentially include:

    • refusing to pay a legitimate claim
    • failing to reasonably investigate a claim
    • not providing any reasons for denying a claim
    • knowingly deviating from state regulations concerning the claims process, and
    • purposely ignoring information that would support a valid claim.

    Individuals can bring a bad faith insurance lawsuit against their own or another car insurance company. However, when suing another car insurance company for its bad faith denial of your third-party claim, you will have to prove more egregious conduct, such as the car insurance company engaging in fraud when handling your claim.

    If an insurance company denies a claim in bad faith, it could be liable for consequential and punitive damages.

    If you believe a car insurance company has improperly denied your claim, it might make sense to discuss your options with a car accident lawyer.

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