What to Do After a Business Insurance Claim is Denied

An insurance claim can stir up a mixed bag of emotions for a business owner. On one hand, you’re apt to be worried about how the claim will impact your operations and bottom line. On the other hand, you’ll feel a sense of relief in knowing you have insurance coverage.

As a claim progresses, you may be surprised to learn that all or part of your claim has been denied. A notice of an insurance claim denial can leave you feeling upset and frustrated. With that in mind, we’re outlining the steps you can take if you receive notice of claim denial and what you can do to reduce insurance denials in the future.

Gain Clarity About the Reason for the Denial 

The first thing you should do when receiving a notice of claim denial is to read the document carefully and try to understand why it was denied.

The claim notice will explain whether the insurance company will pay for part of the claim or completely deny responsibility for the damage. In either case, they’ll explain the reason for their decision. Insurance companies commonly include the policy wording in a claim denial letter which describes whether coverage is included or excluded.

Here are some of the common reasons insurance companies deny claims:

• The claim was not filed timely according to the policy conditions
• The damage or injury wasn’t covered by the policy
• The insurer alleges the claim was fraudulent
• The damages are beyond the coverage limits
• The expenses are less than the deductible
• The insurer needs more information
• You failed to prevent further damage
• You failed to properly maintain your property

In inquiring about a claim denial, one of the bases to cover is to ensure that the company didn’t make an administrative error that negatively affected the insurance company’s decision. Another base to cover is to inquire whether there was a problem in how you submitted the claim that caused a denial. In this case, a minor processing change may reopen the claim for reconsideration.

In addition to an explanation of coverage, a claim denial notice generally describes what steps you can take moving forward. The insurer may reconsider the claim if you submit further information, documentation, or photos. Insurers also typically provide instructions on how to appeal the claim if you choose to do so.

Lastly, insurance notices will also provide instructions on how to contact the insurance adjuster if you have questions about the company’s decision.

Prepare a Response

You have the right to respond to the insurer’s decision for the denial. Before doing so, you’ll want to review your insurance policy carefully and evaluate the coverage in light of the reason for the claim denial.

Your insurance policy contains a wealth of information including your policy limits, deductibles, and the perils it covers. Be aware that the basic coverages may be modified by conditions, additions, and exclusions which will also be included in the policy.

With all the facts in hand, you will be in the best position to craft an appeal letter that offers a solid argument for claim approval. If you have additional evidence that supports your appeal, you may include it in your appeal letter.

Appeals and Arbitration

An appeal is an internal claims process where you ask the insurance company to reevaluate the claim in light of new information or extenuating circumstances. Once you’ve submitted an appeal, the insurance company may reverse its decision, although there’s also a chance the company may stand by its original determination.

If the claim is still not settled to your satisfaction, your policy may allow for arbitration. Arbitration is a process that involves you, the insurance company and a neutral third party called an arbitrator. It is a process that can help resolve a dispute between you and the insurance company without resorting to a lawsuit. The arbitrator listens to the facts from both sides and decides the best way to resolve the dispute.

Insurance companies typically include wording in the policy for how they handle the arbitration process. The arbitration process involves a cost, and you may have to split the cost of the service with the insurance company.

If none of these actions are successful in resolving the dispute, you may want to seek advice from an attorney to explore any potential legal avenues for resolving the claim.

Moving Forward: Reevaluate Your Risk Management Plan

While you may have no choice but to accept the insurance company’s decision, a claim denial should trigger the need to reevaluate your risk management plan.

Are there risks you’ve overlooked? Are there steps you can take to mitigate existing risks? After dealing with a claim denial, it’s a good time to make an appointment with your insurance agent to talk about risk management. Your insurance agent has a wealth of knowledge about insurance products that may help cover unmitigated risks.

To learn more about the claims process or obtain a quote for business insurance, contact one of our licensed insurance agents at Leap Carpenter Kemps Insurance Agency today!