Whether you are a homeowner or a business owner dealing with a property and casualty insurance policy, many policyholders are unaware of their rights in the event that their insurance company unfairly denies, delays or underpays their valid claim. Policyholders have the option to file a bad faith claim against their insurance company if the company wrongly denies their claim or if there's a prolonged period of inactivity in processing the claim. This legal action accuses the insurance company of not fulfilling their obligation to handle the claim fairly and promptly. It can seek not only full coverage of the underlying claim but also compensation in addition to that coverage for damages caused by the unfair practices and aims to hold the insurer accountable for not meeting their responsibilities.
Recently, there has been a concerning uptick in the number of blanket insurance claim denials, a trend that is casting a shadow of liability exposure over insurance companies. This rise in denials has sparked a growing concern among policyholders who find themselves grappling with denied claims that were seemingly within the scope of coverage. As these denied claims accumulate, so does the potential for policyholders to take legal action against insurers, alleging bad faith practices. The denial of seemingly valid claims not only erodes the trust between policyholders and insurance providers but also opens the door for claims of bad faith, where policyholders argue that the insurance company failed to fulfill its obligation to fairly evaluate and process claims. This concerning trend underscores the importance of maintaining a transparent and equitable claims adjudication process.
The surge in blanket insurance claim denials can be attributed to insurance companies' pursuit of profitability in a highly competitive market. Recent data analysis reveals a concerning pattern: approximately 92 percent of denied claims are effectively closed because policyholders do not pursue further action. This realization has led some insurance companies to adopt a strategy of denying claims across the board, as it seems to yield a substantial profit margin. By relying on the likelihood that policyholders won't contest denials, these companies capitalize on the inertia of consumers who may not be aware of their rights or are deterred by the complex claims appeal process. This practice raises ethical questions about prioritizing short-term financial gains over the core principle of providing timely and legitimate coverage to policyholders.
In the absence of immediate reforms, policyholders can turn to legal avenues as a means to counteract unfair insurance practices. Engaging skilled attorneys experienced in insurance litigation can serve as a deterrent against arbitrary claim denials. Attorneys like our firm have played a crucial role in advocating for policyholders by thoroughly reviewing policy terms, assessing the validity of claims, and investigating the circumstances leading to denials. It is critical that policyholders have strong advocates that can effectively challenge insurance companies' decisions by presenting compelling evidence, negotiating on behalf of policyholders, and initiating legal actions when necessary to ensure that insurance companies are held accountable for their actions and fostering a more equitable environment for all those seeking rightful coverage.
Property and casualty insurance companies have the highest profitability margin at an estimated 23 percent or approximately $35 billion dollars per year. By standing up against unfair practices, policyholders will inevitably reduce that profit margin and hold insurance companies accountable for their actions and as a result, more policyholders will receive rightful compensation for their legitimate claims. Additionally, taking action can help policyholders regain financial stability and trust in their insurance coverage while contributing to the overall integrity of insurance processes.
Insurance claims and processes can be complicated, but here are some things to be mindful of as a policyholder during this process:
- Read! Read! Read! the entire policy, all amendments, and all communications from the insurance company.
- Timely file claims and pay premiums.
- Mitigate damages when possible.
- Document and timeline the process and keep records of all communication.
- Consult an attorney for denial letters or reservation of rights letters.
TriAmicus Law, PLLC
"Taking action can help policyholders regain financial stability and trust in their insurance coverage, while contributing to the overall integrity of insurance processes."