Grounds for Denial: Common Reasons Why Insurance Companies Refuse to Defend

January 12, 2025

Insurance Company Actions Are Often Surprising

Insurance companies regularly refuse to provide defense services for policyholders facing legal action. This leaves these individuals both confused and fearful for their future. Facing legal battles alone and being forced to engage private counsel is costly. Many in this position ask, “Am I not entitled to receive this service from the organization from which I purchased my policy?”

If you are facing a refusal to defend, understanding the reasons behind the denial is a crucial step in moving forward.

You need to comprehend the facts in order to respond appropriately.

This can be a challenging process, one best undertaken with the guidance of an experienced and knowledgeable insurance attorney.  Researching and engaging representation is the first step to addressing the precarious position in which you have been placed.

The Duty to Defend: A Cornerstone of Insurance

The Requirements of Your Insurance Company

Most people purchase insurance hoping they will never need it, but believing that if and when they do, their carrier will be there.  In fact, providing legal representation is one of the fundamental promises insurance companies make to their policyholders; they are contractually obligated to provide this service.  Even when insurance companies are unsure of the validity of a claim or the level of policyholder coverage, they are required to help.

Policyholders in conflict with their insurance companies have good reason to be concerned; there is a lot at risk, including financial losses, the expense of engaging counsel on their own, and potential damage to their reputation.

Why Insurance Companies Make the Decisions They Do

Common Grounds for Denial of Defense

Identifying and understanding why your insurance company is refusing to provide you defense services is an important first step in addressing their decision.  In some cases, their decisions may be valid, while at other times they are simply made in bad faith.  Reasons for denial include both policy exclusions and policy limitations.  These may include, but are not limited to:

• Illegal actions: Insurance policies typically exclude representation responsibility after you have committed a criminal act or intentionally harmed another individual.
• Limits to Coverage: Coverage limits exist.  This means insurance companies will pay up to a certain amount in damages (as stated in your policy). If you have reached this figure, your insurance company may refuse to provide additional defense services.
• Policy Structure: Your coverage is limited to the specifics for which you contracted.  So, if your policy covers personal use of your vehicle, and you are being sued for an accident while using your vehicle for work, your insurance company may not be required to assist you. Your actions were outside the scope of your contract with them.
• Coverage Date Issues: Insurance policies provide coverage from one date through another. Incidents that occur outside of those dates may not be covered.
• Location: Your policy may have territory limitations and incidents occurring outside those boundaries may be excluded.
• Drinking and Driving: Insurance policies block coverage for those who cause accidents under the policy exclusion lists, which often include driving under the influence.

Finally, it is common that policies also disallow coverage for any liability assumed through contracts with other individuals or organizations. An exception to this is companies that offer indemnification or hold-harmless agreements.

Other Reasons for Refusal to Defend

Insurance policies are a contract under which each party has responsibilities. Insurance companies require specific behaviors by their policyholders when it comes to providing defense services. What you do after an incident and how you act matters.

First, they expect that you will contact them immediately. Failing to let them know promptly that you are in a position where you will require legal representation can lead to a denial of services.  Additionally, once they are aware of the issue, they require full cooperation with their investigators. Failure to do this can result in their withdrawal of services. Finally, insurance companies expect and require policyholders to be honest with them.

When individuals provide misleading or outright false information, insurers have the right to void their coverage and deny service.

These requirements are part of your policy agreement, and you must abide by them in order to be eligible for assistance. That said, your insurance company’s interpretation is not always correct. When they are wrong, the result is an unreasonable denial and you may have grounds for legal action.

Challenging a Refusal to Defend

The Right Actions Can Have a Real Impact

It is important to recognize that if your insurance company refuses representation, you can take action.  Doing nothing signifies your acceptance of their decision, leaving you financially responsible for your own defense.  Thus, inaction is simply not a viable choice.

First, you should identify and engage a seasoned insurance attorney who is experienced in cases like yours.  Addressing an insurance company’s refusal to defend is a complicated process requiring technical knowledge, time, and experience. Those with legal representation tend to be more successful than those without.

This professional can help interpret technical policy language, assess the validity of the denial based on both your policy language and their reasons for refusal, negotiate on your behalf, and file legal action if warranted.

You and your attorney should review the denial of coverage letter you received. In order to refute their decision, you must understand why they made it.  Their letter should provide specific reasons to which your insurance lawyer can analyze for weaknesses.

Next, it’s time to gather evidence for support. Making sure you have all relevant documentation including a copy of your policy, the lawsuit against you, and all communications with your insurance company is vital.  If you speak with an insurance representative at any time regarding their decision, follow up on your conversation with an email in order to create a paper trail of correspondence. Make sure you provide your insurance lawyer with copies of all information; they can leverage it as they build a case on your behalf.

Doug Terry Law Knows How to Successfully Address Refusals to Defend

Why Choose Us

Facing a lawsuit is a trying time.  Your future is at stake.  Engaging an experienced and knowledgeable attorney is an investment in your future well-being.

In Oklahoma, many in your position reach out to the team at Doug Terry Law.  Our experience is considerable, and we appreciate your position and your state of mind. We have decades of experience assisting individuals with their insurance company disputes, including refusals to defend, and an outstanding reputation for success.  Additionally, we are well regarded for our compassionate and responsive approach to service. As we work toward a positive decision on your behalf, we always strive to minimize the stress associated with the legal process.

Our founder, Doug Terry, began his career providing legal services for insurance companies. While there, he recognized that these organizations were more interested in profits than in helping their policyholders. Thus, he decided to switch gears and provide policyholders with the help they needed to address insurance companies’ bad faith actions. Basically, his goal was to level the playing field. His past experience provides him with a strong base from which to serve his clients; he understands insurance company actions and the reasons behind them and leverages this knowledge to help maximize his clients’ settlements.

Part of his commitment to the community is his practice of offering every prospective client a free consultation. This provides them with the chance to see how he communicates and understand how the team will approach the case.  Contact them today at 405-463-6362 to schedule yours.

As an insurance policyholder, you have a right to a defense; wrongful refusals are wholly unacceptable. At Doug Terry Law we are ready to go to work for you immediately.