Keep Calm and Check Your Policy

What should you do if you feel your insurance claim has been wrongly denied?

First, check your policy, says Jon Michael Smith, a solo insurance coverage attorney in Austin. That may not be easy—particularly if you’ve been with an insurance carrier for a while. “You’d be surprised at the number of times people say they don’t have it,” Smith says.

But the policy is where the action is. Smith recalls a man whose carrier denied his claim on a stolen truck. The problem? The man left his keys in the vehicle, and a policy provision cited that exact circumstance as reason for noncoverage.

“I do talk to a fair number of people where I have to say, ‘Well, if this is the language, you’re going to be out of luck,’” Smith says.

That’s why William Lundquist, managing partner of a Houston-based firm that handles property damage claims, suggests asking the carrier to cite the specific policy provisions that support its denial. “It’s always a good idea to read the policy to verify the grounds for denial and see if there’s another avenue for recovery,” he says.

One of the most frequently cited reasons for denial, he adds, is that the damage predates the coverage period. This is particularly common in claims involving hail damage—a prevalent type of loss in Texas. “Hail gives carriers all sorts of ways to deny claims,” says Lundquist. “If the insured has only been with the insurer for a year or two, the carrier may try to attribute the damage to an older hailstorm from years past.”

Claims are also denied due to construction defects. “Insurers will say something like, ‘Your roof was already compromised, so this interior damage must have been there for some time,’” Lundquist adds.

In recent years, Lundquist has begun seeing more “cosmetic damage” exclusions cited—allowing the carrier to deny damage affecting a property’s appearance but not its function. “Dings, dents, scratches, marring across a roof—a good third of my files on hail losses to commercial roofing systems involve some version of that exclusion,” he says.

Jeff Raizner, managing partner at Houston’s Raizner Slania, says, “For most Americans, their home is their biggest asset and a major part of their net worth. It’s where they raise their family. So they do get frustrated when they feel the company has not treated them appropriately.”

Keeping one’s emotions in check can be difficult, Lundquist says, especially when your home, business, or health is on the line, but it’s recommended. “Adjusters are people too, and I think by and large they want to do the right thing,” he says. “Try to take emotions out of it. Humanizing your situation with objective facts for them to consider will be better than an all-caps email.”

Avoiding denials altogether can start with documenting property inventories or keeping paperwork organized. These lawyers suggest submitting written claims expeditiously, then cooperating with follow-ups.

“If they ask for information, documentation, an inspection—whatever it is—cooperate,” Smith says. “You don’t want to give them another reason to deny.”

To avoid escalating disputes unnecessarily, they say, don’t bring in an attorney until all other options are exhausted or unless the company makes outrageous requests—such as asking for extensive financial records or tax returns on a minor claim. And keep detailed records of communications.

“Understanding when you’ve hit the wall is critical,” Raizner says. “Sometimes the wall is clear—it’s in a letter. The more difficult wall to recognize is when they go dark on you—they don’t respond, or they slow things down and drag things out.”

Lundquist says people should consider hiring a lawyer if the denied claim involves significant and costly damage or if they feel the insurer is acting in bad faith. “If there’s an unreasonable delay without any type of decision, that’s a red flag,” he says. “Or if they fail to conduct a thorough investigation before they deny your claim.”

Watch for policy language limiting the period policyholders have to file a lawsuit—typically two years from the date of the carrier’s initial decision on the claim. “It doesn’t matter that Texas has a four-year limitation for breach of contract,” Lundquist says. “Courts have found those insurance provisions to be valid and binding.”

Smith adds that if you get a letter from the company’s legal department asking you to give an examination under oath, “you should absolutely hire a lawyer. If there’s going to be a lawyer across the table, then you need a lawyer next to you.”