How can you take action after a bad faith insurance denial?

When you file a claim for benefits in compliance with a particular insurance policy requirements, you expect that the insurance provider will make good on their obligation to pay your claim.

Unfortunately, insurance companies have a profit motive to deny claims, potentially including valid claims by policyholders. Sometimes, companies refuse to pay valid claims to protect their own financial interests. Such denials, known as bad faith insurance, mean that the insurance company acts in bad faith despite their obligation to the policyholder or claimant.

When you receive a bad faith insurance denial, you have the right to take action against the insurance company and seek compensation. The first step in doing so typically involves verifying your coverage.

Review your policy documentation and all claims paperwork

If you want to prove that a claim denial was the result of bad faith insurance, you need to verify that the claim you made should receive coverage under the applicable policy. Reviewing the language of the policy itself, as well as the claim submitted and any documentation provided to the insurance company, can help you determine whether your claim meets the requirements for coverage under the existing policy.

In some cases, your review could help you locate the issue that resulted in a denial and make it easier for you to resubmit the claim and secure compensation. Other times, the review will simply verify what you already know, which is that the insurance company has attempted to avoid its obligation to you.

Show that the denial was unreasonable

Different kinds of insurance claims can have different reasons for denials. Health insurance policies may decline to cover care that they know should reasonably fall under the responsibility of a premises liability or motor vehicle liability policy. Errors in paperwork, late submissions or failure to subrogate the claim to the right company are all reasonable causes for a claim denial. Just wanting to avoid paying out on it, however, is not.

Legal action is usually the last step

Once you know the policy was active, the claim was appropriate and the denial was likely in bad faith, you can potentially take legal action against the insurance provider. Communicating with them directly or through a lawyer first may help you resolve things outside of court.

Depending on circumstances, either enforcement actions against the insurance company or a civil lawsuit may be the best approach. The kind of insurance, the nature of the claim and many other factors will influence what the best approach may be given your unique circumstances.

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