Insurance companies can be quite creative and enterprising when setting forth reasons that a claim is denied, coverage is disclaimed, or otherwise not acted upon. If your claim is denied you have few options. You can file a claim with the Maryland Insurance Administration. My experience is that this organization is extremely effective at policing the insurance industry as a whole, but that it is unlikely that you will get the results you desire in a specific instance as a result of that complaint process. For example, the MIA will never award money, or determine how much you should be awarded.
If confronted with a denied claim, the only viable advice is to seek counsel to determine the specific reasons that the claim has been denied and methods of attack to challenge that determination.
Insurance companies offer myriad and diverse reasons for their denials.
- The terms of the policy itself do not provide coverage for the loss.
- The alleged event giving rise to the loss did not occur or did not occur in the manner the claimant says it did.
- The policy was void, voidable or otherwise not in effect at the time of the loss
- The claim is denied based on principles and contributory negligence or assumption of the risk
An attorney can help you draw an important distinction between the type of insurance coverage involved. In this context, one concept is often important. There is a distinction between first-party insurance and third-party insurance. First-party insurance is your own insurance. You purchase it and pay premiums for it. Classic examples of first-party insurance are things like:
- homeowner’s insurance
- health insurance
- disability insurance
- life insurance
- personal injury protection insurance.
Third-party insurance is somebody else's insurance and in this context almost invariably means liability insurance, i.e. Insurance that compensates the third party for a loss caused by an insured person.
- Classic examples of third party Insurance are:
- the liability policies that ensure vehicles in the State of Maryland
- liability coverage under a policy of homeowner’s insurance
- medical payments and commercial liability policies on business properties.
The nature of the claim -first party, as opposed to third party, is important when it comes to the remedy or relief that you can see. If you have made a third party claim that has been denied, almost always your only viable option will be to file a lawsuit against the insured person. By way of example, think of a typical automobile accident where the other driver’s motor vehicle insurance carrier has denied your claim. On the other hand, with first-party insurance disputes, you may have other options. You can certainly sue your insurance company for a breach of contract. If you have a dispute with your own insurance company, who takes the position that there is no coverage under the policy or that the event complained of is not a covered loss, you might be able to file a declaratory judgment action against your insurance company. If your insurance company has failed to act with reasonable diligence and cannot offer sound, reasonably objective, evidence for a denial of your claim, it may be possible to pursue an action for bad faith. Both of these are sophisticated, complex legal claims and I would suggest the guidance of an attorney is almost mandatory when pursuing- although to be clear it's never required that you hire an attorney. In certain applications, these two actions both carry one benefit typically not available in most legal actions in America, i.e. prevailing party attorney’s fees or the chance to have the insurance company pay legal fees and costs for initiating the action. In the absence of a statute or rule that provides for what is known as fee-shifting, in this country litigants typically bear their own attorney's fees and costs. However in first-party actions against one's own insurance company [and potentially declaratory actions against a third party company], one may have the ability to at least request that the insurance company be held responsible for attorneys fees and costs.\
A common first-party claim is made under a homeowner’s policy. In other words, an individual suffers a loss to their home, or part of it, and makes a claim against their insurance company and that claim is denied for one or more of the reasons set out here. Although the individual potentially may bring bad faith claim, and potentially a declaratory judgment action depending on the reasons for the denial of coverage, perhaps the most common relief sought in these instances is through an old-fashioned breach of contract action. Hear the individual making the claim has to show that there was contracted-for insurance, it required an insurance company to cover a loss and that the insurance company failed to do so thereby breaching its obligation to indemnify the claimant for a loss.