Why Your Insurance Claim Was Denied – And How to Fight Back!

Published Date: 10/18/2024

Why Your Insurance Claim Was Denied — and How to Fight Back

When you file an insurance claim, you expect your policy to deliver on its promise: financial help when you need it most. Yet every year, thousands of policyholders are stunned to discover their claims are delayed, underpaid, or denied outright.

In a recent episode of Insurance Hour, host Karl Susman walked listeners through the most common reasons claims get rejected and what consumers can do to challenge a denial. Drawing on decades of experience in California’s volatile insurance market, Susman broke down the realities behind “full coverage,” how carriers evaluate losses, and what recourse you have when something goes wrong.

1. Understanding Why Claims Are Denied

Before you can fight a denial, you have to understand why it happened. Most denials fall into just a few predictable categories:

a. Coverage Gaps or Exclusions

Policies are built around specific “covered perils.” Fire, theft, or collision may be covered, but wear and tear, flooding, or mechanical failure usually aren’t.

“Insurance covers sudden and accidental events,” Susman explained. “It doesn’t pay for things that break down over time.”

b. Policy Lapses or Non-Payment

If a premium was missed—even by a few days—a claim can be refused. California law requires insurers to send notices before cancellation, but those notices are often ignored or lost.

c. Misrepresentation or Missing Information

Failing to disclose prior losses, rideshare activity, or business use of a vehicle can lead to a denial later.

“Honesty up front saves you a nightmare later,” Susman warned.

d. Poor Documentation

Many homeowners and drivers simply don’t provide enough evidence. Adjusters need photos, police reports, receipts, or witness statements to confirm a loss.

2. The Myth of “Full Coverage”

One of the biggest misconceptions Susman tackled was the phrase “full coverage.”

“There is no such thing,” he said flatly. “When people say ‘full coverage,’ they usually mean they bought every optional add-on their agent offered—but that still doesn’t cover everything.”

For auto insurance, “full coverage” typically means liability, collision, and comprehensive. What it doesn’t include are:

• Gap coverage if you still owe more than the car’s value
• Rental reimbursement while repairs are underway
• Uninsured/underinsured motorist property coverage
• Personal injury protection (medical payments)

A homeowner saying they have “full coverage” might discover they lack flood, earthquake, or sewer-backup protection. In other words, the phrase provides false comfort. The real solution is an annual policy review to confirm what’s missing.

3. What to Do the Moment a Loss Occurs

How you handle the first few hours after a loss often determines whether your claim succeeds. Susman outlined several key steps:

1. Document everything immediately.
   Take photos and videos from multiple angles, record the date and time, and write a short summary of what happened.
2. Contact your agent or insurer quickly.
   Reporting delays can raise suspicion or even void coverage under “prompt notice” clauses.
3. Prevent further damage.
   Most policies require you to mitigate additional loss—boarding up windows or covering a leaking roof.
4. Keep receipts.
   If you pay out-of-pocket for emergency repairs or hotel stays, those costs may be reimbursable later.

“Treat your claim like a business transaction,” Susman advised. “Emotions are understandable, but paper trails win disputes.”

4. Inside the Claims Process

Once your claim is submitted, it enters a structured pipeline. Understanding that process helps you manage expectations.

1. Initial Acknowledgment: You’ll receive a claim number and contact from an adjuster, usually within a few days.
2. Investigation: The adjuster gathers statements, photos, police reports, or estimates.
3. Evaluation: They compare your documentation to policy terms and determine liability and value.
4. Resolution: The insurer issues payment, requests more info, or sends a denial letter.

A denial must state specific reasons and reference the relevant policy language. That’s your roadmap for an appeal.

5. When a Claim Is Denied — Step-by-Step Response

Susman outlined a straightforward process for turning a denial into a successful appeal.

Step 1: Read the Denial Letter Carefully

It should list the exact policy clause used to justify the decision. Sometimes denials stem from misunderstanding, not malice.

Step 2: Gather Supporting Evidence

Obtain contractor estimates, expert opinions, or additional photos. If the denial cites lack of proof, fill that gap.

Step 3: Write a Formal Appeal

State why you disagree, reference policy language, and include evidence. Send it certified mail to create a record.

Step 4: Escalate Internally

Ask for a supervisor or claims manager review. Many carriers have “internal reconsideration” processes that resolve disputes without litigation.

Step 5: File a Complaint with the Department of Insurance

If the company still refuses, consumers in California can contact the California Department of Insurance (CDI). The CDI investigates unfair claim practices and can compel a company to reopen a file.

“The DOI won’t act as your lawyer,” Susman noted, “but their involvement often speeds things up.”

6. The Role of Your Agent or Broker

An independent agent can be your strongest ally. Because they represent multiple carriers, they can help interpret policy language or recommend alternative insurers if coverage gaps become obvious.

“Good agents don’t disappear after the sale,” Susman said. “They’re there when the claim hits the fan.”

Agents can:

• Clarify what the policy was meant to cover
• Communicate with adjusters on your behalf
• Provide documentation showing prior disclosures
• Suggest endorsements to prevent future denials

7. Common Listener Questions from the Episode

Susman fielded several rapid-fire questions that revealed how everyday situations can spiral into claim trouble.

Non-Moving Violations and Premiums

Tickets for parking or equipment issues generally shouldn’t affect rates. But serious or repeated violations can trigger underwriting reviews depending on state rules.

Rideshare Work (Uber/Lyft)

Standard auto policies exclude commercial use. Without a rideshare endorsement, an accident while transporting a passenger may not be covered at all.

Hit-and-Run Accidents

Never chase the other driver—safety comes first. File a police report immediately. Insurers require proof of contact or witness statements to process uninsured-motorist claims.

Homeowners in High-Risk Areas

Insurers are tightening underwriting in wildfire and flood zones. A non-renewal isn’t the same as a cancellation, but it leaves homeowners scrambling. The state’s FAIR Plan can offer basic fire coverage, though Susman urged adding a “Difference in Conditions” policy for full protection.

Premium Increases After One Claim

Even a single claim can raise rates if it signals heightened risk. Insurers price on recent activity, not lifetime averages.

8. Lessons from Denied Claims

From Susman’s perspective, most denials share a pattern of miscommunication and assumption. Clients think they understand coverage; insurers assume clients read every page of their policies. Both are wrong.

He encouraged listeners to adopt a more proactive relationship with insurance:

• Ask for a coverage review every renewal.
• Understand deductibles versus exclusions.
• Keep an inventory of possessions with receipts stored digitally.
• Maintain good communication with your broker—before a claim ever occurs.

“Insurance isn’t just paperwork,” Susman reminded. “It’s a partnership. The time to build that partnership is before something goes wrong.”

9. Regulatory Protections: Knowing Your Rights

Every state has a version of the Unfair Claims Settlement Practices Act, which requires insurers to:

• Acknowledge and investigate claims promptly
• Provide written explanations for denials
• Pay undisputed amounts quickly once liability is clear

If you suspect bad faith—such as unnecessary delay, refusal to communicate, or undervaluation—keep detailed notes of all interactions. You can escalate through the DOI or consult an attorney specializing in insurance law.

10. Preventing Future Problems

Finally, Susman offered practical strategies to keep claims from becoming conflicts:

1. Bundle policies with one carrier for coordinated service and potential discounts.
2. Raise deductibles to reduce small claims that trigger surcharges.
3. Install mitigation devices—water sensors, fire alarms, security systems—to earn credits and lower risk.
4. Avoid filing for minor losses. Frequent small claims can lead to non-renewal.
5. Review policies after life changes like home remodels, new vehicles, or business ventures.

The Takeaway

Insurance claim denials aren’t always the end of the story. In many cases, they’re invitations to clarify, negotiate, or educate both sides.

“Most claims can be fixed,” Susman concluded. “You just need to understand your policy, document your loss, and stay persistent.”

In today’s complex market—where disasters, inflation, and regulation constantly reshape risk—knowledge is your most valuable form of coverage.

Read your policy, ask questions, and partner with professionals who view insurance not as a transaction, but as a promise. When that promise is challenged, you’ll know exactly how to fight back.