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What Are Unfair Insurance Claim Practices?

Insurance companies often use unfair insurance claim practices to avoid paying the total amount of a claim that an insured person is due. They may either reject the claim outright or reduce the payout substantially. When someone has dutifully paid their insurance premiums over time and expects that the insurance will be there if they need it, this can come as a shock and an outrage. We’re here to help keep your insurance company accountable to you and the agreement they made with you when you entered into business with them. Here are a few things of which to be aware. If any of these have happened to you, call us.

Who Determines if Insurance Claims Practices Are Unfair?

While there is a National Association of Insurance Commissioners that defines what unfair practices are and how they should be handled, most insurance issues are handled at the state level, not the federal. How each state defines unfair insurance claim practices varies, so something one state deems acceptable might be deemed unfair by another. That’s one reason to work with attorneys experienced in understanding the differences of each state, as well as knowledgeable about insurance company policies and claims procedures.

What Types of Claims Practices May Be Unfair?

There are many methods that insurance companies can use to deny claims or reduce payouts. On the surface, some may look legitimate or like an easy mistake (and sometimes they are–these are human beings, after all, and humans make errors). Unfair practices, however, may start as something as simple as the insurance company saying that they lost your original claim, need more proof of loss, or don’t seem to be able to send the paperwork you need to file the claim in the first place. While one instance could be chalked up to human error, repeated errors of this type may indicate something worse going on.
There are four broad categories of unfair insurance claim practices.

Timeliness

As mentioned above, claims can sometimes be delayed through no fault of the insurer. But at other times, the insurer deliberately slows the claims process in order to avoid paying the claim. That can take the form of not responding to inquiries or the claim you filed, refusing to provide claim forms or explanations for claims denials, or simply not paying the claim even though it’s been proven to be valid under the terms and conditions of the insurance policy.

Misrepresentation or Changes

This category includes situations where the insurance company misrepresented what the policy would cover, such as saying something isn’t covered when the policy clearly says it is. This also includes misleading advertising. You may have signed up for insurance based on an ad that promises a specific type of coverage, but the ad doesn’t explain that that coverage is only available for a more expensive policy, not the basic policy.
Insurance companies will sometimes make alterations to your policy to your detriment and not provide the proper notification for your information and approval. Then when you try to make a claim, you’ll find you don’t have the coverage that you thought you did.

Lack of Adequate Investigation

Many claims require some type of investigation, usually by a claims adjustor. In some cases, the insurance company may not have a detailed process for how they will do these investigations. Without the detailed process, they may try to deny the claim because of a lack of proof when their own process causes the denial.
They may also refuse a claim by saying no damage occurred and using that as an excuse to refuse to send out a claims adjuster to investigate the situation.

Unreasonable Requirements

This category can cover a number of practices, including withholding payments for parts of a claim to try and negotiate a lower payout on a different part of a claim (for example, refusing to pay for auto repair after an accident while negotiating the settlement for any physical injury from the accident). Another tactic is to ask repeatedly for the same information, such as the proof of loss, when you’ve already submitted the proper paperwork.

An insurance company may also offer an absurdly low settlement amount to force you to sue them. The hope behind this behavior is that you won’t want the hassle of a lawsuit or to take the time a lawsuit takes and so will accept the smaller amount of money just to get it over with.

What Consequences Are There for Insurance Companies That Use Unfair Claim Practices?

There are several, if unfair practices can be proven in court. Of course, one of the most important is for the insurance company to have to make good on the claim. Beyond that, depending on the severity of the issue, they may have to pay legal fines. If the unfair practices are especially egregious, there’s a possibility that the state commissioner overseeing insurance companies may take action to suspend or revoke the insurance company’s license. This is most likely in cases where the insurer had to know they were violating the law.

What Should I Do if Think My Insurance Company Is Using Unfair Claim Practices to Deny or Reduce My Claim?

Call us as soon as possible at 855-553-9010 to request a free, in-depth, no-obligation case evaluation. We’ll go over the terms of your policy and the reasons your insurance company provided for why they’re either denying the claim or reducing the payout. Our attorneys are knowledgeable and experienced in understanding the tactics insurance companies use to avoid paying what they should. We’ll represent you and work for the best possible outcome.

Written By: Chad Boonswang
Chad G. Boonswang, Esquire is a litigation lawyer based in Philadelphia, PA. Selected as an ASLA 2014, 2015, 2016, 2017 and 2018 Top 100 Litigation Lawyer, Mr. Boonswang plays to win. As a lawyer, athlete, and scholar, he has always put in the energy, time, and commitment to be the best. After working for several prominent law firms in Philadelphia, including Montgomery McCracken Walker & Rhoads LLP, he founded his own practice in 2002.  Since then Chad has recovered tens of millions of dollars on behalf of his clients from life insurance claims and catastrophic injury cases.  Year after year, he has earned a 10.00 Superb rating on Avvo.

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