Protecting Your Right to Insurance Benefits

It’s unfortunately an all too common occurrence. You suffer an injury because of someone else’s negligence or carelessness, and you notify your insurance provider(s) in a timely manner. To your surprise, a letter arrives from the insurance company, advising you that coverage has been denied. What are your options? Do you simply have to accept the decision of the insurer? Can you initiate legal action and, if so, under what circumstances?

The good news—you have the legal right to challenge the finding of your insurance company. In fact, it happens on a pretty regular basis. Insurance companies are for-profit businesses with an incentive to minimize the amount they pay out in claims—that’s how they maximize their profits. They’re hoping that you’ll simply accept their ruling and be done with it.

However, under the law, an insurer has a number of legal obligations to policyholders:

• Your insurer must comply with the terms of your insurance contract—any material deviation is a breach of contract, which may entitle you to damages
• Your insurer must act in good faith
• Your insurer must not engage in unfair business practices, including misrepresentation

The legal duties imposed on insurers require that they:

• Conduct an adequate and timely investigation of your claim
• Pay all claims where liability is reasonably clear
• Make a timely decision to approve or deny a claim and communicate that to the policyholder within a reasonable period of time
• Provide a reasonable and detailed explanation of why your claim was rejected
• Represent you in any lawsuit covered by the terms of your policy, and provide a meaningful defense

Most insurance policies carry a period of contestability, during which the insurance company can deny claims based on material misstatements in an application. After that period has expired, the insurance company may not use the misstatement to reject your claim.

In most instances, any legal action against your insurer will be based on a breach of contract.