I’m Covered — No You’re Not! How to Dispute Insurance Claims

Fact-checked with HomeInsurance.com

Bumper sticker that reads: Please don't hit me, I 'm not 100% sure about my coverage

If your insurance company is reluctant to pay your claim (imagine that!), there are steps you can take to recover your losses. Photo: Andrew Steinmetz

You’re sitting in your favorite chair when you hear the sound of screeching tires, followed by breaking glass and crunching metal.

Before you even have a chance to get up and see what’s happening, a 1977 Cadillac Coupe Deville crashes through your living room wall, knocking you from your chair and breaking your right arm and left leg.

When you return from the hospital, you immediately call each of your insurers to inform them of the theatrical level of mayhem that has befallen you and that you will be filing claims for your auto, home, and health policies. But after a few weeks, the insurance companies behind your policies offer to pay only a portion of your expenses.

The point of this improbable tale of woe is that sometimes, even though you have insurance and file your claim correctly and in a timely manner, you can still have a disagreement with your insurance company.

Disagreements can be about anything — from the amount of a bill to whether or not you are covered. Resolving claim and coverage disputes requires knowing your rights and understanding the process for equitable settlement.

Understanding Your Rights

Insurance of all kinds is regulated independently by each of the states and the District of Columbia. Even though each state’s laws are independent of each other in the way they are worded and implemented, they share many of the same underlying principles.

The names of laws that regulate how insurance companies process and settle claims can be anything from Pennsylvania’s Unfair Insurance Practices Act to the Unfair Claim Settlement Practices Act of Texas. Many of the laws are based on model regulations written by the National Association of Insurance Commissioners, NAIC.

Some of the components of most state regulations are:

  • Insurance companies must accurately represent what is in your policy. That means they cannot deliberately tell you your policy or its terms mean something they do not. The rule also prohibits insurance companies from changing your policy without informing you beforehand.
  • They cannot withhold payment on one claim as a way to force you to settle on another. For example, if that ’77 Coupe Deville ricocheted off your SUV and through your living room wall and your homeowners and auto insurance were with the same company, they could not refuse to pay your auto claim unless you accept their offer to repair your living room.
  • Insurance companies must acknowledge and process your claim quickly. What constitutes “quickly” varies from state to state.
  • They are forbidden from asking you to fill out unnecessary paperwork in order to have your claim processed or as a means of delaying timely payment of your claim.
  • Insurers must have a good reason for denying or delaying a claim, and if they do, they must provide the policyholder with an explanation.
  • Insurers may not force you to sue them by making settlement offers that are substantially lower than the amount claimed.
  • They may not make it a practice to appeal most court awards that favor policyholders. Again, the language and enforcement of this vary from state to state.

Reporting Violations

If you feel an insurance company, agent, or adjuster is violating any of your state’s laws on unfair-claims practices, you should contact the representative’s supervisor or manager and inform them of your belief. In most cases, this is enough to correct the problem.

If the manager or supervisor is unwilling or unable to rectify your concerns, you should contact your state insurance department. If state regulators find that your claim is part of a pattern of abuse, they can initiate a market-conduct investigation that can result in punitive actions, including fines.

The Dispute Process

No amount of regulation and enforcement will ever eliminate all claims disputes. A fact of life is that honest people sometimes disagree, which is why there are mechanisms to resolve conflicts.

The range of solutions runs from talking it out to taking it to court. Obtaining the best possible outcome requires following a path of escalating actions until a settlement is found. The first three things you should do are:

Review your policy: Carefully review your entire policy for instructions, conditions, and terms of settlement. Sometimes there are procedures spelled out for how to dispute a claim offer. Following the insurance company’s guidelines (if there are any) will reduce their ability to be obstinate.

Confirm your coverage: Double-checking the amount of your coverage is important because it will help you determine whether or not there is a point to proceeding. For example, if your insurance company is only offering you $9,500 on a $15,000 loss and you only have $10,000 worth of coverage, there isn’t much you can do.

Define the difference: You can’t have an effective debate if you don’t know what the disagreement is about. That means not only knowing how far apart you are in monetary terms, but why there is such a difference of opinion. Some reasons are:

  • Do they think the damage/loss is not as extensive as you do, and why?
  • Is their concern that the repair/replacement costs you are seeking are too high?
  • Are they questioning the cause of the loss?

Get Organized

Disputing a claim is like fixing any other problem: It goes best when you have the necessary tools. In this case, that means having all your documentation handy and organized.

Start with the relevant policy and any evidence of the loss, including photos, police reports, and receipts or other documentation regarding the value of lost or damaged property. Organize all the communication you have had with the insurance company and their representatives, including your agent and adjusters.

Be sure to take notes during phone and in-person conversations with the insurance company. Make note of the date and time of the contact and whom you spoke with. Be sure to get full names, titles, and ID numbers where applicable. The same is true for your dealings with contractors, repair shops, and adjusters.

Talk to Your Agent or Broker

Even though your agent or broker is technically not part of the claims process, they can be a valuable resource in a dispute. At the very least, they may be able to provide you with insight into the claims process based on the experience of other customers.

Sometimes a phone call from an agent is enough to shake loose most or all of the deficient funds from a reluctant claims processor. This is especially true for agents who are high-volume producers because the insurer wants to keep them happy and sending new business their way.

Put It in Writing

If phone calls to the claims department and your agent or broker haven’t resolved your claim, it may be time to move up the corporate ladder by addressing a letter to the appropriate manager.

A claims representative should be able to give you the name and mailing address of their department manager or division director. Send them a letter that lays out the nature of your dispute in detail, accompanied by copies of related documentation, finished off with references to relevant state regulations.

A letter does not have to be professionally written by a lawyer to be effective, it just has to be clear and factual. Your letter should include:

Identify Yourself : Tell the manager how long you have been a customer and the other policies you have with their company. This puts the manager on notice as to what’s at stake. This is important because it’s far less expensive to keep an existing customer (you) than it is to get a new one.

Provide a Reason: One or two sentences explaining why you’re writing, such as a dispute about a homeowners claim.

The History: This is the heart of the letter, where you will explain what has occurred since you filed the claim. Walk through the process from start to finish, keeping each step short and sweet. The point of this section is to show you have exhausted other channels and this is your last stop within the insurance company. Be sure to include references to attached supporting documents.

Not Good Enough: Even though the manager will have access to your file, which will include any settlement offers that have been made, it is important to mention what you have been offered. Then you can concisely explain why the amount or terms are not acceptable.

RSVP or Else: Let the manager know when you expect a response. A good rule of thumb is 10 days. Don’t make idle or unrealistic threats, but let the manager know that if you do not hear from him in the allotted time you are prepared to take further action, such as filing a complaint with the state insurance department.

Note: As someone who has dealt with customer complaints professionally, I suggest you avoid making wild declarations like, “I’ll have you on the nightly news!” Or worse, “I know where you live.” These tactics may feel good, but they will get you labeled a crank and you won’t be taken seriously.

Conclusion: Thank the manager in advance for their assistance and include contact information, including your full name, address, and phone numbers.

Going Outside

After your internal (insurance company) options have been exhausted, your next step is to apply external pressure. The process for filing a complaint with your state’s insurance commissioner depends on your state.

The best place to start is the department’s website. In most cases, the URL is www.insurance.XX.gov where the XX is the two letter abbreviation for your state. If you are unable to find a complaint form, find the contact page and call or email them asking for assistance in filing a complaint.

The complaint process is different in each state. In some cases, they will ask you to fill out an official form and wait to be contacted. In others, they may ask for a narrative letter similar to the one you wrote to the insurance company and still others may do everything by phone, with a representative recording the complaint or taking notes. State investigators will then contact the insurance company.

From your point of view, the process may end there, with the insurance company coming back to the negotiating table and making a better offer in the hope of averting a protracted investigation. In some cases, the state may require the insurance company to enter into arbitration or mediation.

Court of Last Resort

Your last option is court. Depending on your state and the amount in dispute, you may be able to file on your own in small claims court. While it’s always better to have an attorney whenever you go to court, in most places small claims or magisterial courts do not require or expect an attorney. While judges in these courts are understanding of those without professional representation and grant more latitude, there are limits to their patience and understanding.

Final Word

In almost all cases, if an insurance company issues a check in your name and you cash it, the game is over. Your claim will be considered settled.

Sometimes, through mistakes in communication (wink, wink), insurers will issue checks to people disputing settlement amounts. Policyholders often will cash the check under the mistaken impression that it is a partial payment and that they can still fight for more money. If an insurance company representative offers a payment to “tide you over” while you continue the dispute, make sure you get a letter stating that the check does not represent payment in full and that you retain the right to dispute the amount.

Loading Disqus Comments ...