What If My Home Insurance Claim is Denied?

The steps to take when fighting back against insurers in Colorado

By S.M. Oliva

For many Colorado residents, their home is their single most valuable asset. This is why you take out homeowners' insurance to protect you against potential damages or losses related to your real property. Unfortunately, having insurance is no guarantee the insurer will pay your claim without question. Indeed, many homeowners are surprised to find that when they file a claim, the insurance company refuses to pay or offers to settle for less than the full measure of their property damage.

“Their job is to resolve that claim for the smallest amount possible,” says Thomas W. Henderson, an insurance coverage attorney at Burg Simpson in Englewood, “and often that means it’s not fully compensating policyholders for their loss.”

If your home insurance claim is denied, here are a few things to keep in mind:

1. Figure Out Why the Claim Was Denied.

Insurance policies are contracts. And insurance companies are experts when it comes to drafting their contracts to minimize their own liability. All homeowners' insurance policies contain certain exclusions and conditions of coverage that the insurer will strictly construe against the policyholder. Some of the more common reasons for denying coverage include:

  • The damage to the property is of a type not covered by the policy. For example, a policy that covers rain damage from a storm, but excludes wind damage.
  • The policyholder failed to timely notify the insurer of the damage or otherwise failed to meet a precondition of coverage.
  • The damage occurred after the term of the policy expired.

Whatever the reason, make sure the insurance company gives you a written explanation of its reasons for denying your claim. The insurance company cannot simply reject your claim without giving its reasons. And in many cases, a denial is based on an incorrect understanding of the facts that you can rebut.

“It’s really important that the policyholder understand if the denial was proper,” Henderson says. “There are many instances where I review a denial letter and say to a client, ‘Didn’t you tell me A, B and C?,’ and they say, ‘Yeah.’ ‘Well the insurance company isn’t addressing that. That would be very important information.’ Sometimes they say, ‘Well I told them,’ to which I say, ‘Let’s tell them again.’ Other times it’s, ‘I haven’t told them,’ so I say, ‘Let’s tell them because it might change the frame of analysis.’”

2. Gather Evidence to Support Your Claim.

Ideally, you need to do this before you even call the insurance company or file an online claim form. You should always carefully document the damage to your property. Take pictures of any damaged areas. Obtain written estimates of repair costs from trusted contractors. And above all, document all contacts between you and the insurance company.

3. Speak with an Attorney About Your Appeal Options.

Most insurance companies have an internal appeal or review process for denied claims. But before you utilize such a process, it is a good idea to speak with a qualified Colorado insurance attorney first.

“From a denial standpoint, a knowledgeable lawyer knows what the insurance company’s duties and responsibilities are, how the policies are to be interpreted, and hence can put the best argument forward to get the insurance company to change their mind,” Henderson says. “My M.O. is to try to get the insurance company to do the right thing—I call it ‘writing the do-the-right-thing letter.’”

Said letter intends to show why the claim should be covered and why an exclusion isn’t applicable, but does not threaten a bad faith lawsuit until it’s absolutely necessary. Internal appeals may be used to “run out the clock” on potential litigation. Colorado has a statute of limitations for breach of contract claims, which is three years from the breach, while the statute for bad faith is two years from the bad faith conduct. It also has a statute of limitation for violation of the delay/denial statute, which is two years from the unreasonable delay or denial.

Of course, litigation should always be a last resort. But when an insurer simply refuses to honor its contractual obligations, you might not have a choice. And in many situations, the mere threat of a lawsuit will bring the insurance company to the bargaining table. But every case is unique, which again is why you need to speak with a qualified attorney before taking any action.

“There are times when people come to my office with a denial, saying, ‘This isn’t right,’ and after I look at the policy, I say, ‘I hear where you’re coming from, but I don’t think you can get there.’ Sometimes the insurance company is correct,” Henderson says.

That said, “too often the insurance company gets it wrong, so it never pays to assume they’re right,” says Henderson; by contrast, consulting an attorney to consider your rights can’t hurt.

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