Plans for Contesting Legal Claim Denials

Homeowners insurance is crucial for protecting your home. However, denied claims after damaging events like hail storms can lead to unexpected costs and stress. I’d like to explain why claims get rejected so you can hopefully avoid this issue. But if your claim is denied, I also want you to have all the information you need to contest it.

In This Article: 

• Why Do Homeowners’ Claims Get Denied?
• Next Steps if Your Claim Gets Denied

Why Do Homeowners’ Claims Get Denied?

Insurance companies must verify all submitted claims. This means ensuring that:

1. Claims are legitimate and submitted in good faith, and
2. The damage described in the claim is covered by the policy.

Your insurer will also affirm that your policy is still active and in good standing. In other words, they want to see that you haven’t recently changed or canceled your policy, or lapsed in payments.

Common Reasons Homeowners’ Claims Get Denied 

Knowing why insurance companies deny claims can help you prevent issues in advance and increase the chances of a successful settlement. Here are common reasons for insurance company denials:

1. Filing errors: It’s better to be thorough than quick. Missing information, incomplete forms, or submitting paperwork to the wrong department can look suspicious. Double-check all details and complete your forms accurately.
2. Misreading policy terms and exclusions: You need more than just a general idea of what’s in your policy, or you might misinterpret what is covered. Review your policy carefully and get clarification if needed.
3. Lapse in coverage due to nonpayment: Your insurance company won’t pay you if you’ve neglected to pay them. Missing payments or renewals can cause coverage loss. Always pay premiums on time. If you’ve missed payments, actively renew your policy and resume timely payments to avoid gaps.
4. The damage isn’t covered: Policies have specific events and perils that will be covered. If the damage falls outside the scope of coverage, your claim may be denied. For example, your home is damaged in a flood. You have general coverage against wind and rain, but never added specific flood coverage. Your insurer might deny paying for damage caused by flooding.
5. Failure to file the claim soon enough: Insurers require prompt reporting. Notify your insurer of damage or loss quickly. Delaying your filing can make it look like you waited for the damage to get worse.
6. Not making temporary repairs after damage: Failing to mitigate damage can result in a denied claim. If there’s a damaged wall or a hole in your roof, find a temporary fix.
7. Insufficient documentation: The more thorough your evidence, the harder it will be for the insurer to deny your claim. Provide documentation like photos, receipts, estimates, and detailed records.
8. Damage considered normal wear and tear: Insurance covers sudden and accidental damages, not wear and tear or regular maintenance issues. You are responsible for the routine upkeep of your home.
9. Your insurer suspects fraud/false statements: Provide accurate information to avoid denial based on suspicion of fraudulent activity. Do not give your insurer incorrect information that you hope will boost your claim. If you last re-tiled your roof 12 years ago, don’t tell your insurer it was four years ago.

Matching Exclusions 

Insurance providers and homeowners often disagree on matching repaired areas to undamaged ones, especially after hail damage. The question: Is a repair complete if the materials and quality don’t match the undamaged portions?

Here’s an example: Your insurer agreed to replace damaged roofing tiles, but with much lighter tiles than the undamaged black ones. This left an unappealing, mismatched look.

I discussed this in-depth in another article here. (Hyperlink X) Generally, Colorado courts want insurers to at least try to preserve uniformity after repairs. The problem is, state law does not explicitly require matching.

That’s one fact insurers may point to when challenging matching obligations. Others include:

• No uniform appearance existed before the damage, so matching is unnecessary.
• Non-uniformity from wear and tear should not warrant full replacement.
• “Reasonably uniform” appearance is possible with less expensive repairs.
• “Like kind and quality” replacements suffice for “reasonable uniformity.”

If you want effective and prompt coverage after a damaging event, you must understand your policy. Of course, there’s one reason for claim denials I have not yet listed, and it’s the one we’re most concerned with: Insurance bad faith.

Next Steps If Your Claim Gets Denied 

Your home is damaged, and repairs are costly. An unexpected claim denial from your insurer can feel like a kick in the stomach. Here’s what you do:

Review Your Policy and Claim Denial 

Insurers must provide a written, policy-backed reason for denying any part of your claim. — C.R.S 10-3-1104 (1) (h) (IV)) So first, review your policy side by side with the denial paperwork. By doing this, you can:

Assess the Validity of the Denial 

Look for specific policy exclusions or limitations that match the reasons given in the denial papers. Try to clearly understand what your policy covers, and what it does not cover.

For example: Your policy may cover rain and wind damage, but not hail damage unless you paid extra for it. A storm could bring heavy winds and hail, leaving you grappling with your insurer over which caused the most damage to your home.

Also, compare the listed reasons for the denial with your policy and your claim. Consider the following:

• Did the insurer misunderstand any facts about your situation?
• Did you fail to communicate clearly?
• Is there a specific term in the policy that you and the insurer disagree over?
• Did you not provide sufficient evidence to back up your loss and damage?
• Can the denial be rectified with a clearer, more detailed claim?

Ask for an Appeal 

You can request an internal review of your denied claim. Fill out an official appeal form, and your insurer will assign a new adjuster to review your claim.

Pros: It sometimes works, and you gain clarity on the denial reasons.

Con: Insurers may drag out the appeal to delay your ability to file a lawsuit. In Colorado, the statute of limitations is two years for bad faith claims and three years for breach of contract.

After following these steps, you still might disagree with the insurance company over your claim’s rejection. If so, it’s time to seek outside help.

Bring in a Professional 

Your insurer has an incentive to pay your claim if it’s legitimate and the damage indisputable. That’s just good business, and it helps your insurer build a good reputation. But …  they also have an incentive to deny or limit claim payouts when they find a reason. What looks like a “reason” to an adjuster might be hogwash to a well-informed outside party.

What kind of outside party should you consult? Consider one of these three:

A Public Adjuster 

A public adjuster helps policyholders with insurance claims. This licensed professional works on your behalf to negotiate a fair settlement with the insurance company. Also, you can hire a public adjuster at any point in the process. He or she can help with comparing your policy to your claim denial to determine how to proceed. It’s harder for your insurance company’s adjuster to pull the wool over a public adjuster’s eyes.

A public adjuster can recommend that you seek an appeal or even pursue legal action against a recalcitrant insurer. However, they cannot represent you in such a matter. For that you need …

An Insurance Attorney 

Like a public adjuster, an attorney with expertise in insurance matters can assess your claim denial for potential bad faith. Also like an adjuster, an attorney is a skilled negotiator who can advocate for a fair settlement. However, a lawyer’s powers go even further.

He or she can subpoena documents, gather additional evidence, and file motions in court. Having a hard-nosed, no-nonsense attorney on your side can reduce your stress while increasing your chances of an approved, or settled claim.

A State Regulatory Agency 

The State of Colorado recommends you exhaust all internal reviews or appeals first. After that, you can seek an external review from The Colorado Division of Insurance through their Consumer Complaint Portal online. The Department of Regulatory Affairs will refer your insurance matter for expert review.

Pursue Litigation for Unreasonable Delay or Denial 

If you decide to pursue legal action against your insurer — hopefully on the informed advice of a public adjuster or attorney — make sure to do the following:

1. Document all correspondence with the insurance company and its representatives. Keep copies of emails and notes of phone conversations, including dates and names. Remain calm and assume calls are being recorded.
2. Maintain records of your insured property, including receipts and pictures. Take photos immediately after the damage.
3. Mitigate the damage the best you can, and record the steps you took to do so. Use receipts and photos as documentation.
4. Track all expenses incurred, such as repairs, healthcare costs, attorney’s fees, and lost wages. Be honest and as accurate as possible in your assessments and record-keeping.
5. Choose an attorney with extensive experience in insurance litigation. Insurance lawsuits can be complex, time-consuming, and expensive.

Thorough documentation and an expert attorney present a strong case if you decide to sue your insurer.

Our Insurance Attorneys Are Here for You 

The last thing you need after your home has been damaged is a dispute with your insurance company. Unfortunately, it can happen despite your best efforts due to tricky circumstances or even trickier policy language. One of our tenacious and experienced insurance attorneys can make all the difference, even against your insurance company’s team of lawyers. We’ll stand up for you and seek the best possible outcome. Call 303-688-0944 for a case assessment.