January 28, 2023
When you buy insurance, you may think that it’s a simple transaction. You pay your premiums, and your insurance company will reimburse you if something goes wrong. You know that there are listed exceptions, but what happens if you think something should be covered? Do insurance companies try to get out of paying? Can an insurance company refuse to pay out?
What if an Insurance Company Doesn’t Pay a Claim?
When you file an insurance claim, your insurance company might approve it, reject it, or say you’re owed a different amount. Their decision is not supposed to be whatever they feel like paying. An insurance policy is a contract with two equal parties.
You have the right to be fully reimbursed for any claims you submit in line with the terms of your policy. Your insurance company has the right to pay only the claims and amounts provided for by your policy. There are cases where people submit claims they’re not entitled to or even commit fraud, but there are also cases where insurance companies deny or reduce valid claims. Sometimes, an insurance company doesn’t pay a claim when they should. In those cases, the company is acting in bad faith, and you have legal remedy you can pursue by working with an experienced insurance lawyer.
Why Do Insurance Companies Try to Get Out of Paying?
Insurance companies are a business. Their profit is the money they make in premiums minus their expenses and the insurance claims they pay. Like other businesses, they want to increase their profits by controlling expenses like insurance claims. This is why insurance companies try to get out of paying claims.
All insurance companies review their claims to make sure they pay only valid claims. Sometimes, a too-strict process can result in claims being wrongly denied. Other times, there might be pressure within the company to look for ways to deny claims rather than objectively looking to see if a claim is valid. This might come from the company’s leadership, or individual adjusters or managers might be trying to increase their own bonuses.
What Is a Bad Faith Insurance Denial?
An insurance denial can be made in either good faith or bad faith.
Good Faith Insurance Denial
A denial is in good faith when it is either correctly denied or incorrect but the insurance company had a reasonable basis for doing so. For example, an auto insurance company might refuse to pay a claim on your liability policy because it says you were driving for a ride-sharing service at the time of your accident. If you were driving for a ride-sharing service and that is excluded by your policy, the denial is correct and in good faith. If you weren’t but the insurance company has some evidence showing that you were, they may be acting in good faith even if they denied your claim incorrectly.
Bad Faith Insurance Denial
An insurance company acts in bad faith when they’re trying to find reasons to deny claims that they know are valid. Under Oklahoma case law, this is a breach of their implied duty to deal fairly and act in good faith with their insured. Dealing fairly doesn’t have a complex legal meaning. The insurance company can have reasonable rules and procedures to make sure that a claim is valid, but they can’t make it too hard for you to submit and prove your claim.
What Happens If Your Insurance Company Wrongly Denies Your Claim
Can an Insurance Company Refuse to Pay Out?
An insurance company wrongfully denying your valid claim is a breach of your insurance contract. While an insurance company may refuse to pay out on your claim, that doesn’t mean their choice is always appropriate. If they should pay your claim but deny it, and you’re unable to convince them to pay, you have the right to sue them in court for the amount that’s due under your policy. This is true even if they denied your claim in good faith. The insurance company is not the final decider — a court of law is, if necessary.
When the insurance company acted in bad faith, they committed a separate tort. A tort means they did something wrong that you can sue for. This could mean you’re entitled to additional compensation beyond just having your insurance claim paid.
Can an Insurance Company Refuse to Pay Out on a Claim?
There are many tactics used when an insurance company refuses to pay out on a claim. Some may start out as legitimate, but any tactics used to deny your claim could cross the line into bad faith if the insurance company takes things too far.
- Continual delays: Delays can happen in an insurance claim if someone goes on vacation, has too much work, or something unexpected happens. Other times, these are just excuses that the insurance company uses while they hope you give up or that the time you have to pursue your claim runs out.
- Denying your damages: It’s possible for different professionals to disagree on what work needs to be done to fix damage or to have different pricing. Sometimes, insurance companies will send you to someone they know low-balls repairs even though you really need more work to do the job properly.
- Twisting your statements: When you talk to the insurance company, they might write down or record everything you say. If you leave out details because they didn’t ask questions or you didn’t know you needed to tell the insurance company everything right then, they might try to say you’re changing your story later.
- Telling you something isn’t covered when it is: You might get an inexperienced adjuster who doesn’t understand your policy, or a bad faith insurance company might be hoping you don’t understand your policy. There might also be reasonable disputes over whether something is covered, like whether a water intrusion should fall under flood insurance or home insurance.
- Telling you not to hire a lawyer: The insurance company might believe in good faith that you don’t need a lawyer, or they might be afraid of what a lawyer will tell you. Remember that your insurance company has an interest in trying to pay you less if they can. Unless you have a simple claim where you’re confident they’re paying everything you’re entitled to, it can be a good idea to get a second opinion from an insurance lawyer who works for you.
Did Your Insurance Company Refuse to Pay Your Claim?
Get Help from an Experienced Insurance Lawyer
Are you having trouble getting your insurance claim paid? Our insurance lawyer, Doug Terry, had strong experience winning for his clients, including really large verdicts. Turn to our team for help and find out your legal options to get the payment you deserve for your claim. Call us today at 405-293-3541 to schedule a consultation.