October 28, 2016

#3 Don’t Rely On Insurance Claim Denial Letters

In part three of our series: The Ten Biggest Mistakes Made By Corporate Insurance Policyholders, Brian Friel addresses a common policyholder mistake:  believing insurance claim denial letters.      

Properly Evaluating Insurance Claim Denial Letters

The central issue that Brian Friel addresses is what policyholders should do to evaluate a claim denial letter.  But first, it is important to understand why so many claim denial letters are written and sent to corporate policyholders.  The insurance business model is based on maximizing premiums and minimizing claims.  The minimization of claims is done, in part, through the use of claim denial letters.  Accordingly, claim denial letters are written for the purpose of convincing corporate policyholders that they should not pursue a claim.  As a result, these claim denial letters are expertly drafted by outside insurance company legal counsel.  They contain policy language and sometimes case law quotations.  Many a policyholder has received such a letter and concluded that a claim is not worth pursuing.  Based on this, insurance companies know that the strategy of sending claim denial letters works.

For a number of legal reasons, it is also considered “best practice” for an insurance company to deny any claim that they believe has the possibility of not being covered.  

Claim denial letters are more often than not incorrect.  Insurance carriers focus on what might potentially cause a claim to be excluded from coverage, and ignore obvious allegations bringing a claim within coverage under the policy.  Claim denial letters often misstate the law and facts supporting coverage.  Insurers invariably distort or ignore parts of the policy which support coverage, and conveniently overlook key facts supporting coverage.  Legally, insurance carriers lose sight of the fact that there is a legal presumption of coverage for claim, and that all reasonable doubts must be decided in favor of coverage.   

Fighting Insurance Claim Denial Letters

Improper insurance claim denial letters can be fought and reversed.  Claim denial letters should be countered by a letter from insurance recovery counsel providing a thorough analysis of the facts and law supporting coverage.  Policy language must be compared to the facts and allegations, and case law must be presented in a way that objectively lets the insurance carrier know that they made the wrong decision.  Done correctly, the insurer will then open dialogue with respect to settlement.  Watch the video to learn more. 

For a transcript of this video, please see below

The third mistake, common mistake, that we see corporate policyholders make all the time is relying too much, too heavily on insurance company’s coverage denial letter in response to a claim that you provided notice of. What we see here is an insurance company responds either directly in-house through a claims adjuster, perhaps from outside counsel directly or outside counsel ghostwriting the letter on behalf of the in-house claims adjuster. It’s a 10-15 page letter, single spaced, quoting provisions of the policy, maybe throwing some case law citations in there. It all looks official. It all looks so intimidating and persuasive, and at the end of the letter, it says, “We, for the foregoing reasons, we deny coverage.”

We find companies, even sophisticated companies, over-rely on those letters in terms of the credence they provide, the assumption that it must be true because it’s 15 pages of single-spaced text. It has some case citations. It’s got some policy language with lots of exclusions, and it doesn’t look good. In almost every one of those situations that we’ve dealt with, those letters written by insurance companies or their outside lawyers, they’re wrong. Their denials are wrong, and the reasons why they’re providing those denials to their policyholder clients is wrong as well. They cite to wrong policy provisions. They omit certain policy provisions. They don’t properly cite and rely on the right case law or even out of the right jurisdiction. The lesson today is do not rely and take as truth an insurance company’s denial letter.

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