When your car insurance claim is denied

Why car insurance claims get denied

Most denials come down to one of a handful of reasons. Knowing which one you face tells you what evidence could change the answer.

• No coverage in force. The policy lapsed for nonpayment, or the car or driver wasn't listed.
• The coverage doesn't fit the loss. A collision claim on a liability-only policy, or a rental bill with no rental coverage.
• An exclusion. Common ones cover business use such as delivery driving, intentional damage and wear and tear.
• A missed duty. Late notice of the crash, no cooperation with the investigation, or repairs made before the insurer could inspect.
• Damage not from this crash. The adjuster thinks some of the damage was already there.
• Fault. On a claim against another driver, their insurer says its customer was not to blame.
• Misrepresentation. The insurer says something in the application or the claim was untrue.

What the denial letter has to say

Every state has a law against unfair claim settlement practices, and most are built on the NAIC's model act. It lists as unfair, among other things, misrepresenting the policy's terms and refusing to pay a claim without a reasonable investigation. The NAIC's model regulation adds the paperwork rules:

• In writing. A denial has to be written, not just said on the phone.
• The reason, tied to the policy. The letter must refer to the specific policy provision, condition or exclusion the insurer relies on. Vermont, for example, writes this into its own fair claims rule.
• On time. The decision is due within 21 days after proof of loss, or the insurer must tell you why it needs more time.
• A path to review. If you object to the denial, the insurer must tell you in writing that you may have it reviewed by the state insurance department.

States adopt the model in different forms, so your state's exact rule may differ. Find it on your state's page in claim rules by state.

Then open your own policy to the provision the letter cites and read it in full, including the definitions it uses. Words such as "insured," "your covered auto" and "business" are often defined at the start of the policy or of each part, and the definition can be narrower or broader than everyday use. Ask yourself three questions: does the provision say what the letter says it does, do the facts in the letter match what happened, and did the insurer leave out anything you told it or sent it. A denial that rests on a wrong fact, such as the wrong date of a payment or a driver who was in fact listed, is the easiest kind to reverse. A denial that rests on a fair reading of a clear exclusion is the hardest, and knowing that early saves you time.

Ask for the records behind the decision

You can't answer a denial you can't see. Send a dated email or letter, with your policy and claim numbers, that asks for:

1. A complete copy of your policy, including the declarations page and every endorsement that applied on the date of the crash.
2. The exact provision the insurer relies on, quoted, with the facts it believes trigger it.
3. The evidence it used: the adjuster's estimate and photos, any inspection or engineer's report, the police report, and any recorded statement you gave.
4. A written answer by a date about 10 days out.

Not every state requires an insurer to hand over its whole claim file, but the request costs nothing and its answer goes into the record. Where an insurer settles a repair on its own estimate, the NAIC model already requires it to give you a copy.

Your options, in order of cost

Appraisal, a clause in many auto policies, only settles the dollar amount of a covered loss. It can't overturn a denial of coverage. If the insurer agrees the loss is covered but disputes the number, see the appraisal clause.

When the other driver's insurer says no

A denial from the other driver's insurer usually means it disputes fault. That insurer owes its contract duties to its own customer, not to you. You still have routes:

• Your own collision coverage pays for your car under your policy, minus the deductible, and your insurer can then seek the money from the other side; see first-party vs. third-party claims.
• Uninsured motorist coverage may apply if the other driver had no insurance; check how your policy defines an uninsured vehicle.
• A claim against the driver in small claims court or a regular court, if the amount is worth it.

The deadlines that keep running

A denial doesn't pause the time limit to sue. In Texas, for example, an injury or property damage lawsuit generally has to be filed within two years of the crash (Civil Practice and Remedies Code §16.003); see Texas claim rules. Your policy may add its own deadlines for disputing a decision, so read its conditions section. If a denial looks unreasonable rather than mistaken, talk to a licensed attorney in your state before those deadlines get close.

Questions people ask