Insurance companies are not required to pay every claim made. However, they must act in good faith to investigate claims, make timely decisions, and pay legitimate claims with a reasonable settlement. If an insurer fails to do any of these things, it is acting in bad faith.
Insurance companies have been known to deny valid claims in hopes the claimant will not pursue the matter. That is an act of bad faith. If your insurer has denied your claim, it is important to review the denial to ensure it is not an act of bad faith.
Legitimate Reasons For Denial
As stated before, insurance companies are not required to pay every claim a policyholder makes. Here are two common reasons for denial:
The cause of the damage is unknown. Most insurance policies cover sudden losses caused by an identified source. If the claim is for damage caused by an unknown source, the insurance company may legitimately deny the claim.
The cause of the damage is specifically excluded by the policy term. A very common example of this is flood damage. Almost all homeowner policies do not cover damage caused by natural flood. If a homeowner tries to make a claim for flood damage, the insurer has the right to deny the claim.
Always verify the legitimacy of the denial. If you don't, you may be paying for damages that should be paid by the insurance company.
Determining If The Denial Is Legitimate
In most jurisdictions, the insurance company is supposed to provide written notice that a claim is being denied. That notice should include details on the reasons for the denial. If you don't get a written notice, ask the insurer to provide one.
Once you have the notice in hand, get out your policy and read the section referenced by the insurance company. Make sure that it relates to your claim. It is not uncommon for an insurer to note a section in the policy as the reason for the denial, but, in reality, it has nothing to do with the claim at all.
Sometimes, the notice will not provide the details of why they are denying the claim. It is important to ask for that information. If the insurer cannot detail why they are saying "no," then it is a sign that they are not acting in good faith.
Fighting a claim denial can be difficult for most policyholders. The insurer has experience in making a denial seem legitimate. If you receive a denial on what should be a valid claim, the next step you should take is to talk to an experienced attorney at Stockard, Johnston, Brown & Netardus, P.C. in Amarillo, Texas.