Auto Insurance Basics

Auto Insurance Claim Denials

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When you pay for auto insurance coverage, you expect your insurer to have your back when it comes to approving your claims. If your insurer or another insurer denies your claim, you might wonder what you did wrong. Your claim may have been denied for a valid reason, or your insurer may not have a fair reason for denying your claim. You can file an official complaint if you feel that your claim was unjustly or unlawfully denied. Below we outline the common reasons for a legitimate denial and how you can find help to solve claims disputes.

Common Reasons for an Insurer to Deny Your Claim

You rely on your insurer to pay for certain damages and repairs based on your coverage limits, and it can be disconcerting to receive word that your insurer refuses to pay for a claim. Claims Adjusters cite the following as common and legitimate reasons for insurers to deny claims.

Policy Limits

It’s important to keep in mind that every policy has its limits, and regardless of your damage, there is nothing an insurance company can do for you once your claim exceeds your coverage limits. When you purchase auto insurance, you must select what type and extent of coverage you would like. The higher the coverage you select, the more your insurer will pay for damages in the case of an accident. The type of coverage you select will determine the specific damages for which your insurer will pay. For example, if you do not add collision coverage to your policy, your insurer will not pay for the cost of repairs to your car after an accident. Your claim could be denied because:

  • Your claim exceeds your coverage limits.
  • You have already exhausted your coverage limits.
  • You are filing a claim for coverage that you did not purchase, such as a claim for repairs when you do not have collision or comprehensive coverage

Violation of State Law

An auto insurer can deny your claim if the damages resulted at a time when you were driving illegally. Most states require drivers to possess a valid license and form of financial responsibility while driving. If you’re filing a claim for an incident that occurred while you were violating state law or your insurance policy, your insurer or the other party’s insurer has good reason to deny your claim. The insurance provider's claims department may deny your claim on account of violation of state law or your auto insurance policy if:

  • You were driving while intoxicated or driving under the influence at the time of the accident.
  • The insurer believes that the accident was avoidable.
  • You were driving without a valid license.
  • You were driving without valid auto insurance.

Miscellaneous Reasons

Insurers may also deny your claim based on circumstantial evidence or doubt surrounding an incident. After an accident, you should be sure to gather as much information as you can so that you can give your insurer or a third party insurer the most complete understanding of the incident. Your insurer or the other party’s insurer may have doubts about the legitimacy of your claim if:

  • You did not report the accident immediately to the police or your insurer.
  • You did not seek medical attention immediately after the accident, leading your insurer to have suspicions that you are filing a claim for injuries that were not caused by the accident. 
  • You misrepresented information when getting your quote, and the insurer found out about it in the course of investigating your claim
  • Your insurance company is actually not licensed in the state, and the insurance agent you have been working with is a fraud.

Solving a Claims Dispute

If you feel that your claim was wrongly denied, or was denied on false grounds, you can file an official complaint. Check with your state’s Department of Insurance to inquire about submitting a complaint for a claim denial. Most state-run insurance departments have a special unit set up to deal with complaints. For example, California’s Department of Insurance has set up a Claims Mediation Program that helps consumers further negotiate with an insurance company when there are claims in dispute, provided that the claims meet the requirements for eligibility. 

Before seeking legal action, check to see if your state has a system set up for complaints about claim denials. If all else fails, consider speaking to attorney about representation for help resolving a claims dispute. 

Advice from Claims Adjusters

To avoid a claims dispute, you should try to file first party claims with your insurer as much as possible. Claims adjusters we've spoken to have shared that third party claims can be more commonly denied, in their experience, compared to claims filed with your own insurer. When you are in an accident with another driver, who has been deemed liable, that driver’s insurer may be hesitant to comply with your claim or process it in a timely fashion.

In addition to avoiding filing third party claims, personal injury attorney Jonathan G. Stein advises drivers to be nice and cooperative when dealing with an adjuster. Claims adjusters can work anywhere from 100 - 400 claims at a time, depending on the size of the company's claims department. Furthermore, they may be visiting these claims once a month. Basically, they tend to be dealing with more claims than they can handle, and they tend to be more pleasant or helpful with consumers who are easy to work with and understanding. 

If you want to make the claims process even faster, you should gather as much information as you possibly can, especially if the amount you're filing for is large. Retired claims adjuster Vanessa Lumby emphasizes that the more complete and comprehensive information you can supply the adjuster with, the easier and faster the process will go. There's less time spent on administrative tasks such as going back and forth to get information from all parties in an accident, and a decision can be made faster. 

Based on how the auto insurance company's claims department is structured, and how much experience your assigned adjuster has at the company, there are rules and processes in place that can guide the claims settlement process. For example, other claims adjusters we've spoken to point out that larger claims might have to go through a manager's approval before getting settled. The situation might be out of your claims processor's control.

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