Insurance policies are designed to provide financial protection when unexpected events occur. However, disputes between policyholders and insurance companies are common, often arising due to claim denials, underpayments, and delays. If you’re facing an insurance dispute, understanding your rights and the best strategies for resolution can help you secure the coverage you deserve.
In this article, we’ll explore the most common types of insurance disputes, the reasons they arise, and how to effectively resolve them—whether through negotiation, legal action, or alternative dispute resolution methods.
1. Claim Denials
Why Do Insurance Companies Deny Claims?
Insurance companies deny claims for various reasons, including:
- Policy Exclusions: The insurer argues that the loss is not covered.
- Lapsed Policy: The policyholder missed premium payments, causing the policy to lapse.
- Inadequate Documentation: Insufficient evidence was provided to support the claim.
- Misrepresentation or Fraud Allegations: The insurer believes there was inaccurate or misleading information in the claim.
How to Resolve a Denied Claim
✔️ Review Your Policy: Carefully read your policy to confirm coverage.
✔️ Request a Written Explanation: Ask for a formal letter explaining the denial.
✔️ Gather Additional Evidence: Provide photos, receipts, medical records, or other supporting documents.
✔️ File an Appeal: Most insurers have an internal appeal process for reviewing denied claims.
✔️ Consult an Insurance Attorney: If the insurer refuses to reconsider, a lawyer can help challenge the denial.
2. Delayed Insurance Payments
Why Do Insurers Delay Payouts?
Insurance companies may delay payments to:
- Conduct lengthy investigations.
- Request unnecessary documentation.
- Pressure policyholders into accepting lowball settlements.
How to Resolve a Delayed Claim
✔️ Follow Up Regularly: Keep track of all communications and demand timely responses.
✔️ Submit a Formal Demand Letter: A legal notice requesting prompt payment may prompt action.
✔️ File a Complaint: Report the delay to your state’s insurance regulatory agency.
✔️ Seek Legal Action: If delays are unreasonable, an attorney can help enforce prompt payment laws.
3. Underpaid Insurance Claims
Why Do Insurers Offer Low Settlements?
- Depreciation Disputes: The insurer reduces payouts based on the age or condition of the property.
- Misinterpretation of Policy Terms: The company may minimize coverage to limit its payout.
- Adjuster Bias: Some adjusters may undervalue losses to save the company money.
How to Dispute an Underpaid Claim
✔️ Compare Estimates: Get independent repair or medical estimates to counter the insurer’s valuation.
✔️ Request an Explanation: Ask how the insurer calculated the payment.
✔️ Negotiate: Provide evidence showing why a higher payout is warranted.
✔️ Hire a Public Adjuster: They can assess the loss and negotiate a fair settlement.
✔️ Seek Legal Representation: If negotiations fail, an attorney can escalate the dispute.
4. Bad Faith Insurance Practices
What is Bad Faith?
Insurance companies are legally required to act in good faith when handling claims. Bad faith occurs when they:
- Deny valid claims without a reasonable explanation.
- Fail to conduct a proper investigation.
- Ignore policyholder communications.
- Refuse to pay a claim without justification.
How to Hold Insurers Accountable for Bad Faith
✔️ Document Everything: Keep detailed records of all interactions with the insurer.
✔️ Demand Justification: Request a written explanation for any unfair claim decisions.
✔️ Report to State Authorities: File a complaint with the Minnesota Department of Commerce or your state’s insurance regulator.
✔️ Pursue a Bad Faith Lawsuit: If bad faith is proven, the insurer may be liable for additional damages.
5. Homeowners Insurance Disputes
Common Homeowners Insurance Disputes
- Denied storm or fire damage claims.
- Underpayment for water damage or mold remediation.
- Disputes over “Act of God” exclusions.
How to Resolve Homeowners Insurance Disputes
✔️ Get Independent Assessments: Obtain damage reports from contractors or inspectors.
✔️ Demand a Re-Evaluation: Request a second inspection if you believe your claim was undervalued.
✔️ Appeal the Decision: Most policies include procedures for appealing claim denials.
✔️ Hire a Lawyer: If the insurer refuses to honor the policy, legal action may be necessary.
6. Health Insurance Disputes
Common Reasons for Health Insurance Denials
- Claim labeled as “not medically necessary.”
- Pre-existing condition exclusions.
- Disputes over coverage limits.
How to Challenge a Health Insurance Denial
✔️ Obtain Medical Documentation: Get a letter from your doctor supporting the treatment’s necessity.
✔️ Appeal Through the Insurer: Health insurers must provide an internal appeals process.
✔️ File an External Review: If the appeal is denied, you can request an independent review.
✔️ Consult a Health Insurance Attorney: If the denial is unlawful, legal action may be required.
7. Auto Insurance Claim Disputes
Common Auto Insurance Disputes
- Claim denied due to policy exclusions.
- Disagreements over fault in an accident.
- Low settlement offers for vehicle repairs.
How to Resolve Auto Insurance Disputes
✔️ Obtain Police Reports & Witness Statements: Strengthen your case with evidence.
✔️ Challenge Fault Determinations: Provide proof if you disagree with the insurer’s decision.
✔️ Request a Vehicle Appraisal: If the settlement is too low, an independent appraiser can reassess damages.
✔️ Negotiate or Take Legal Action: If the insurer refuses to pay fairly, consult an attorney.
When to Hire an Insurance Attorney
If your insurer is acting unfairly, legal intervention may be necessary. A skilled insurance attorney can:
✔️ Challenge unfair claim denials.
✔️ Negotiate higher settlements.
✔️ Pursue bad faith lawsuits for additional damages.
Contact SJJ Law for Expert Insurance Dispute Resolution
If you’re facing an insurance dispute, don’t settle for less than what you deserve. SJJ Law specializes in insurance law, helping policyholders fight claim denials, delays, and bad faith practices. Contact us today to get started!