Millions of people in the United States file insurance claims each year. About one out of every 20 insured homes has a claim filed each year — and with about 70 million insured homes in the United States, that’s about 3.5 million homeowner’s insurance claims annually. The load doesn’t stop there — for health insurance claims, the annual number is about 1.4 billion, according to the AARP. And auto and life insurance claims add many more.
Fortunately for the majority of Americans, most insurance claims get approved. According to the American Academy of Family Physicians, the health insurance industry averages a 5% to 10% denial rate. So 90 to 95% of claims get approved every year.
Still, in an industry as massive as the insurance industry, even small refusal percentages come out to enormous numbers of denials. The AARP reports that health insurance companies reject about 200 million of the 1.4 billion claims filed every year. And the Detroit News reports that health insurance claim denials are rising, in part because of prior authorization, step therapy and formulary requirements imposed by insurance companies.
The denial of a claims payout can lead to incredible frustration, confusion, expense and prolonged physical pain for the person who made the claim — and often for the person’s family and associates as well.
There are different reasons why an insurance claim is refused. Most often, the company will determine the event you are making a claim about was not covered under your specific policy. In rarer cases, the insurance company may claim your payments were not up to date and the policy was void for this or some other reason. In some cases, an insurance company may accuse a claimant of fraud.
No matter why an insurer refuses to pay, the first step is to stay calm. Review the rejection letter or ask why the claim was denied. If the problem is with the filing process or due to an administrative error, you may be able to fix it quite simply. You will also want to review the policy carefully yourself or with an attorney so you understand exactly what is and isn’t covered.
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Why an Insurance Company Denies a Claim
Regardless of what you hear on national television advertising, an insurance company is not on your side, nor are you in good hands. That is because an insurance company is a for-profit business. An insurance company does not exist to pay you as much money as possible. Their business model is to pay you nothing at all or as little money as legally possible.
If the insurance company denies your claim, the first thing you need to do is understand why it has happened. An insurance company relies on a veritable cornucopia of reasons to deny your claim. Some of the most common reasons are the following:
1. LACK OF COVERAGE
An insurance company will use fine print to “hide” the fact that certain types of accidents or injuries are excluded from your policy. Denials will often be made based on vague technicalities that you were completely unaware of when you purchased your insurance.
2. YOUR COVERAGE HAS EXPIRED OR LAPSED
Coverages are not always automatically extended, and policyholders can sometimes forget or neglect to renew these coverages. A simple mistake can result in a denial that will cost you thousands of dollars. When you purchase insurance coverage, make sure you thoroughly read the fine print so you understand what coverage will renew automatically and what you will need to renew yourself.
People can submit a claim which may contain incorrect information or not comply with all the requirements that are necessary for submission. Before you submit a claim, pay attention to the documentation required, who needs to receive the claim and the time limits to make a claim — sometimes it can be as little as 24 hours.
4. NOT SEEKING TREATMENT IMMEDIATELY
If you have been injured in a car accident or during some other event, it is crucial that you immediately seek medical treatment if you are injured. If you wait a week or longer to seek medical treatment, the insurance company may cite the delay as a reason to deny your claim. They may argue that because you did not seek treatment immediately, you were not hurt.
5. FAILURE TO NOTIFY THE INSURANCE COMPANY
As we mentioned above, you are required to notify your insurance company that you have been in an accident in a timely fashion. If you have been in a car accident, for instance, and you are injured, your insurance company should be one of the first calls that you make after the accident. If you wait a week or longer to report the accident, the insurance company will say there were unable to investigate the incident and deny your claim.
If you make a false or exaggerated claim, an insurance company may accuse you of trying to commit fraud. If this is true, you may face criminal or civil charges.
7. A BAD-FAITH DENIAL
An insurance company may deny your claim for purely bad-faith reasons. They may offer you lots of justifications and a tsunami of insurance jargon, but all they are trying to do is hide that they do not want to pay you any money. If you believe that your insurance company is acting in bad faith, you should immediately contact an attorney.
What Should I Do If My Claim Was Denied Because of a Filing or Administrative Error?
If you believe that the insurance company has made a mistake in denying your valid claim, it is important that you do not immediately think about filing a lawsuit. In many cases, especially those involving filing or administrative errors, it is possible to work out the problem with the insurance company and have your claim settled in a timely fashion.
Your first step is to carefully review the denial letter that the insurance company sent you. It is essential that you understand why your insurance company denied your claim. This will help you more directly address their concerns. You may have forgotten to send in a piece of evidence or even sign a claim form — mistakes that you can fix easily.
It is also possible that the insurance company made an administrative error such as misspelling your name or entering the wrong insurance number or service date. If you find such an error, ask your insurance company to fix it before you proceed with your claim. Sometimes, in the case of a denial by a healthcare company, the medical provider has entered your injury under the wrong code. This can be fixed merely by asking the medical provider to correct the mistake and sending in a new file. Doing so helps make it more likely for the insurance company to pay.
How Can I Appeal the Denial of My Claim?
Most insurance companies allow policyholders to appeal a denied claim. If you were in an automobile accident, an attorney can help you gather the information that you may need to submit to address the denial. If you are appealing a denied medical claim, an attorney can also help you gather the important documentation. Documentation includes medical records, invoices for treatment, a police report or hospital admittance record in the event of an accident and even personal statements from friends and family about how your medical situation is affecting your life.
There are things that you can do, however, that will increase the likelihood of making a successful appeal:
1. Know Why Your Claim Was Denied
As we mentioned above, it is hard to make a successful appeal if you do not understand the reasons why you should appeal. Take a look through the letters or emails you have received. Do they explain the reason behind the denial? Do they point you to a provision or a paragraph of your insurance policy explaining the denial? For instance, in the case of a denied healthcare claim, your insurance company will send you an explanation of benefits (EOB) that details the reasons why your claim was denied.
Or has the denial occurred because the company needs more information? In the auto insurance context, your insurance company may require a note from a doctor saying that you can’t work before the company will pay you for wage loss. Or the company may require you to fill out an application for benefits before you can receive an auto insurance payout for auto-related health costs.
Insurance companies will often use codes to explain their decision. If the company does not include a key to help you understand the codes, you can call them and ask them to explain it. Under the Affordable Care Act, the insurer has a responsibility to explain to you the reasons they denied your insurance claim in understandable terms.
2. Collect the Evidence
Whether you are making a claim on a car insurance policy, a health insurance company, or a homeowner’s or renter’s policy, you need to provide evidence that supports your claim. In the case of a car insurance claim, this could be a copy of a police report about the accident, photos taken at the scene of the accident and witness statements.
For healthcare claims, you want to have hospital admittance reports, referrals from your doctor if you have needed special treatment, copies of any prescriptions you have been prescribed and other medical records. The insurance company’s website will often contain information about the documentation you need to appeal a claim.
A good way to prepare for any questions about homeowner’s policies is to keep records and receipts about all your possessions, especially the more expensive ones. Take a video tour of your home and then keep that recording in a safe place. If you need to make a claim, and the insurance company is disputing whether you had the item, you can use the video recording to prove your case.
3. Do the Paperwork
You will probably need to fill out forms or write letters as part of the appeals process. Make sure you are using the correct claim number and your insurance ID number. Check the company’s website for appeals forms. Often you will receive a faster reply if you use the company’s paperwork rather than writing a letter on your own. If you are not sure how to appeal and what paperwork is needed, call the insurance company and ask them.
4. Organize, Organize, Organize
Insurance companies handle hundreds of claims every day. They have systems in place to deal with all this paperwork that allows the company to track your original claim and any appeals that you make. It is important that you mirror this process. Keep all your files and documentation together in one place to which you have easy access.
Keep copies of every email you receive from the company and make notes about every phone conversation. Ask the name and the job title of the representative to whom you are speaking, the date and the next steps that the representative recommends. It is also a good idea to ask for a “call reference number.” If you need to call the company back for further conversation, you can give them the call reference number and the representative will be able to pull up your file.
5. Do Not Get Angry at the Wrong Person
When a claim has been denied, and you have car repairs or medical bills piling up, it is hard not to feel frustrated and angry. There is a tendency to want to yell at the insurance company representative who you reach on the phone. Remember that this person likely played no role in the denial of your claim. Instead, try to turn the person on the phone into an ally who can help you speed up the process.
Insurance company phone reps are accustomed to being yelled at by angry customers. Speaking with someone who treats them with courtesy and respect makes them want to help you with your claim. If you do find yourself unable to contain your frustration, let the representative know you are not angry at them. While you understand your problem is not their fault, you are angry at the way the company has treated you.
6. Stay the Course
It is not unusual that insurance companies will pay your claim or affirm your appeal but only after a long and frustrating process. It is crucial you consistently follow-up with the insurance company and document the entire process. Insurance companies sometimes count on people getting so frustrated that they eventually drop their appeal. Do not fall victim to this tactic. Be persistent and let the insurance company know that you are not going to go away until you receive the benefits to which you are entitled.
7. Be Prepared to Take Your Claim to the Next Level
If you have tried without success to appeal your valid claim, it is time to start thinking about increasing the pressure on the company. This may mean taking your appeal to a state insurance regulator or hiring an attorney if you believe that the denial is a result of bad faith actions by the insurance company.
Can I Sue My Insurance Company If They Deny My Claim?
Yes, you can sue your insurance company, especially if you believe that the insurance company has acted in bad faith. You can sometimes solve these problems, however, with the help of a lawyer before launching a lawsuit. Remember that insurance companies are for-profit businesses. They hate losing money. If they see that you are not going to be put off by their denials and that you consider suing them for their actions, it may be cheaper for them to settle with you. They can then avoid paying all the expenses that are involved in a lawsuit such as attorney fees, court costs and perhaps a higher settlement than anticipated.
Some companies, however, will continue to deny your valid claim. Insurance companies are required by law to abide by the terms of your policy and act in good faith. They also cannot engage in unfair trade practices. If you think that the insurance company is engaged in any of the following activities, you should contact an attorney immediately:
- An incomplete, delayed or inadequate investigation of your claim.
- They refuse to pay what the policy dictates when your claim is clearly valid.
- They delay the approval of a valid claim for an unreasonable amount of time.
- They denied a claim without any reasonable explanation or no explanation at all.
- They refuse to defend you when you are the subject of a liability lawsuit when a liability policy covers the claim.
- Most states allow insurance companies what is known as a period of contestability that allows them to contest or deny your claim. Some companies, however, will still try to deny your claim because of a mistake or an error on an application that can be easily fixed after this period has elapsed.
If you believe that your valid claim was denied for any of the above reasons, you probably have grounds for suing the insurance company. You should immediately contact an attorney familiar with the tactics used by insurance companies to undermine valid insurance claims.
Whether it’s hail or flood damage to a home, denied medical bills or repairs to a vehicle — or you’ve lost a loved one and the life insurance company is refusing to pay out the benefits — you have rights. An insurance company has a duty to treat you fairly and evaluate any potential claims in good faith. If you think your insurance company is acting in bad faith and treating you unfairly, you may have a bad-faith claim against the company.
If you feel an insurer is acting unfairly or in bad faith, contact an insurance attorney, such as the team at KBG Injury Law. We can help you understand what is going on and can guide you through the appeal process. While you can work through the appeals process with your insurance company without legal counsel, you may benefit from having an attorney who understands the process to build a strong case on your behalf. Keep in mind the appeal process can be time-consuming, so working with an attorney can be most efficient.
Even if your appeal is denied, you and your attorney can contact a state regulator or your state ombudsman to resolve the conflict. You can also file a complaint against your insurer. Again, working with an attorney can clarify this process for you.
If you are struggling to get a payment insurance company payout you feel you deserve from your insurance company, contact Katherman Briggs & Greenberg. Insurance companies have entire departments of attorneys on their side. Don’t you deserve an attorney with more than 30 years of experience?