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When is My Insurance Company Allowed to Deny a Claim?

Insurance companies may deny a claim when there is a policy exclusion or policy-based justification for denial, when the claim is insufficiently supported, when the policy has lapsed, or when there is reason to invalidate the policy itself, such as when the insured party included misleading information on their initial application.

Policy Exclusions

Insurance policies are often written to indiscriminately exclude certain types of claims.  A life insurance policy may exclude coverage for suicide for a certain amount of time after a policy is entered or may exclude coverage for dangerous activities like skydiving or scuba diving.  A health insurance policy may exclude coverage for self-inflicted wounds, for pre-existing conditions, or for medically unnecessary treatments such as cosmetic enhancement.

Many of these exclusions may be vague or hidden in the fine print, or they may be based on technicalities.  Just because they are in the policy somewhere does not mean that they are legitimate reasons for a denial.

Policy-Based Reason for Denial

In addition to certain types of claims being excluded, insurance companies will often deny a claim when the insured party fails to behave in accordance with their duties under the policy.

For health insurance claims, for example, insured parties must seek medical treatment within a reasonable amount of time.  Failure to seek treatment or a delay in seeking treatment, which can lead to an injury worsening unnecessarily, may be grounds for denial.

A health or disability insurance claim may also be denied when the claimant behaves recklessly after becoming injured.  If an insured party exacerbates their injury by ignoring physician recommendations or otherwise causing their injury to become worse, an insurance company may deny a claim or lower a settlement offer.  Likewise, if the insurer can prove that the policyholder caused their injury intentionally, they may deny the claim.

Lapsed Policy

Insurance coverage is generally not automatically renewed each month without payment of premiums.  Failure to pay premiums can lead to a policy lapse.  If injury, disability, or death occurs after a policy has lapsed, then the insurer can deny the claim.  The specifics of how and when a policy will lapse depends on the type of insurance and the specific language in the policy.  A whole life insurance policy might continue in force after missed payments, for example, while a term life insurance policy will typically lapse.

Note that insurers give policyholders a grace period after a missed payment to correct an overdue premium.  Typically, the grace period is 30 days.  During the novel coronavirus pandemic, most insurers (at the request of the State of California) extended the grace period to 60 or 90 days in response to widespread economic hardship.

Incorrect, Incomplete, or Unsupported Claim

Claimants must also follow strict protocols when filing claims.  They must be filed within a certain time after the injury occurs and with appropriate support.  Including insufficient details about the claim or failing to provide comprehensive medical records can lead to denial of an otherwise valid claim. 

Claims are often denied due to technicalities.  Failure to file a timely claim, failure to notify the appropriate parties (such as employers), or failure to follow other rules may lead to an unnecessary claim denial.

Problem With the Initial Application

An insurer may seek to rescind a policy rather than merely deny a claim.  Rescission of a policy invalidates the policy in its entirety and involves refunding paid premiums.  An insurer might rescind a policy if the policyholder included material misinformation or omissions in their initial application.

Unfortunately, instead of investigating the applicant at the time of the application, under certain circumstances insurance companies can go back and invalidate a policy years later when the policyholder files their claim–a patently unfair process known as “post-claim underwriting.”

Depending on the type of insurance, insurers may be subject to time limits for rescinding policies.  For example, in California, a life insurance policy may only be rescinded for fraud on the application within two years after the policy is issued or reinstated, a time restriction known as the “contestability period.”  If your insurance company tries to rescind your policy to get out of paying a claim, call a seasoned insurance denial attorney as soon as possible for help.

Insurance Claim Denied?  Gianelli & Morris is Ready to Help.

If you are a California policyholder or beneficiary and your insurance claim has been wrongfully denied, call the insurance law attorneys Gianelli & Morris for a free consultation regarding your case.

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