In certain situations, an insurance company can refuse to pay a claim. Illinois is a fault state, meaning that if you are in an accident caused by another person, he or she is required to compensate you, as well as other drivers, pedestrians, or passengers, for damages suffered because of the crash. If you are the victim of another person’s negligent driving in Illinois, you can get compensation by filing an insurance claim. While you may have suffered damages, the insurance company has the right to accept or deny the claim.
If you have filed a claim which has been denied, it can lead to frustration, confusion, and stress. It is important in this situation to review the rejection letter carefully. Understanding why insurance companies deny claims may help you know what to do if your claim is denied.
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Why Do Insurance Companies Deny Claims?
If you have had an insurance claim denied, knowing why the insurance company denied your claim will help you to determine what to do next. In Illinois, insurance companies are required to provide you with the reason for denying your claim. Below are some common reasons why an insurance company would deny a claim.
The Type of Damage or Injury Is not Covered
Often, insurance policies have a list of types of injuries or damages that are excluded. If you are claiming one of the items on the list, the claim can be denied based on these exclusions. You may or may not be aware of what is on this list, depending on how closely you have read your policy.
Coverage Has Expired or Lapsed
An insurance company will deny a claim if it has determined that coverage has expired or lapsed. There can be several reasons for this – premiums were not paid on time, the insurance company unilaterally ended the policy, or the policy has expired. Sometimes, coverages are not extended automatically, and the policyholder must renew the policy. If you purchase coverage, it is a good idea to check if it renews automatically, or if you need to renew it. If you forget or neglect to renew coverage, it can result in a claim denial.
Insurance companies will only compensate you if there is clear evidence that the policyholder is to blame for your injuries or damages. If there is anything to suggest that the policyholder is not at fault, then your claim might be rejected. Illinois has a comparative fault policy, meaning that if you are partly to blame, then your claim will be reduced by a percentage proportionate to the percentage of your fault. If you were 51% or more at fault in causing an accident, then you will not be entitled to compensation at all.
Disputed Cause of Injury or Damages
To recover compensation from an insurance policy, the injuries or damages that you are claiming must be a result of the accident. Any pre-existing injuries or damages will not be covered. Insurance companies will deny a claim if there is no sufficient evidence linking your injuries or damages to the accident.
Disputed Extent of Injuries or Damages
Insurers will pay only for the extent of the injuries or damages suffered in the accident. If they feel that you have exaggerated your injuries or damages, they may reject the claim. For example, if you claim to be unable to work due to a minor car accident, but that is an unlikely outcome for your injuries, the insurance company may refuse to pay. Always ensure that you have details and evidence to establish the extent of your injuries in supporting your claim.
There are procedural requirements that you have to follow, and necessary information that you have to provide when submitting a claim. Failure to follow the proper instructions may result in a claim being denied on procedural grounds.
Failure to Notify the Insurance company
You are required to notify the insurance company within a reasonable amount of time. If you do not do so, the company may claim not to have had an opportunity to investigate properly and may deny the claim.
This is when you make a false claim or give false information in your claim. In this case, the company may accuse you of fraud, which can lead to criminal or civil charges.
Bad Faith Insurance
Bad faith is dishonest or unacceptable behavior. There may be times when you have fulfilled all of our obligations in terms of the insurance policy, but the insurance company denies the claim without a valid reason and simply does not want to pay you the money. In this case, the insurance company is simply acting in bad faith by not wanting to uphold its duties in terms of the policy.
How Do You Know If the Insurance Company Acted in Bad Faith?
Not every denied claim is bad faith. To prove bad faith, you must prove that the insurance company denied a valid claim, and that the insurance company’s actions were unreasonable.
Illinois law lists actions which establish bad faith. While there are many grounds listed, below are some of the more common actions. If the insurance company did any of the following, it will qualify as a bad faith claim:
- Knowingly misrepresenting information or provisions about the policy or coverage.
- Failing to acknowledge communications regarding the claim with reasonable promptness.
- Failing to pay compensation due in terms of the policy, or knowingly denying a reasonable and valid claim.
- Failing to conduct a proper investigation to determine correct facts, or failure to adopt reasonable standards in the investigation. In this case, the company will have denied your claim without having proper information.
- Not attempting to settle your claim once liability is reasonably clear.
- Attempting to settle the claim for less than it is reasonably worth.
For some types of insurance, there may be other grounds to prove bad faith specific to that insurance type. For example, if you are a worker, you should know how to prove bad faith insurance in workers’ compensation on grounds aside from those listed above.
What to Do If Your Claim Is Denied
If an insurer denies your claim, you have several options. You can request an internal appeal, request an external review, file a complaint with the Illinois Department of Insurance, or file a bad faith claim against an insurance company.
The first step in challenging a denied claim is to appeal the decision. If your claim has been denied, you have the right to an internal appeal.
To do this, you should review the determination letter telling you why the claim was denied. If you understand why your claim was denied, you will better understand how to appeal the denial.
You should collect relevant information and documents, as this will help you to support your claim. This includes policy documents, criteria, and instructions for a claim. You should also collect evidence including police reports, photographs, witness statements, bills, and receipts to prove your claim. The insurance company’s website may have information about what documentation you will need to file a claim. For the best outcome, an attorney can help you appeal your claim.
After filling out the necessary paperwork, your attorney can submit the appeal request. This request consists of the appeal forms, together with any additional information that the insurer might request, and evidence that you wish to provide. Your attorney will make sure you follow the instructions closely and make copies of all documents that you submit so that you have records of everything.
This is where a review is conducted by an independent third party to audit the insurer’s decision to deny coverage. You can request an external review if you have not received a response from an internal review after a specific time period. This is 30 days if you have not received any treatment or service, or 60 days if you received treatment or a service, but the insurer denied payment. You can also request an external review if the insurer denies coverage after an internal appeal.
The Illinois Department of Insurance has a form packet that contains instructions as well as documentation needed to request an external review.
Filing a Complaint
In Illinois, you can file a complaint with the Department of Insurance. You can do this if the insurer decides that your claim is not eligible for external review, or still denies coverage after there has been an external review. The Illinois Department of Insurance provides a complaint form as well as instructions for filing a complaint.
Bad Faith Claim
A bad faith claim is a lawsuit in which you pursue the full value of your compensation from the insurance company. In Illinois, when an insurance company acts in bad faith, it is liable for bad faith damages which include economic loss, attorneys’ fees, and punitive damages.
If your insurance company has acted in bad faith, a bad faith insurance lawyer can help you through the process of getting your compensation.