A small-business owner may file a bad faith insurance lawsuit if an insurance company is dragging its heels in investigating a claim or refuses to provide information why it has denied a claim. There are other times when an insurance company investigate a claim in prompt fashion and provides a reason why the claim is being denied. The insured may disagree with the reason for denial and
If the insured feels the claim was wrongly denied, it is possible to appeal that decision. If an appeal is unsuccessful, it may make sense to file a lawsuit. This is not a bad faith insurance lawsuit. Rather, it is a dispute regarding the insurance coverage.
Why claims get denied
There are several reasons why an insurance company may deny a claim, including:
Missed timeline for filing a claim – Most policies have specific timelines in which a claim must be reported. If a deadline is missed, it may be cause for denying a claim.
Missed premium payment – An insurer may claim a missed payment resulted in a lapsed policy.
Insufficient documentation – Many business owners keep meticulous notes about every aspect of their company. This should be no different with an insurance claim. Keep every document that is part of the claim. Some initial claims are denied because they do not include proper documents to support the claim. Following up with proper paperwork may be all that is necessary to get a more favorable result.
Exclusions – An insurance company may claim a certain type of damage – loss due to flooding, for example – is not covered under the existing policy. After damage has occurred is not the time to review a policy to make sure all the coverage you wish to have is included.
Failing to take mitigating measures – Some insurance policies require policyholders to take certain steps to prevent damage or limit it. The insurance company may deny a claim or undervalue it if it feels proper steps were not taken.
Respond to a denied claim promptly
Just as you may have a defined window of time to file an initial claim, you likely have a limited amount of time to appeal a denied claim. Consulting with a knowledgeable insurance dispute lawyer will ensure you submit the strongest possible response.