Why Auto Insurance Claims Get Denied

On the surface, the concept appears straightforward: we buy car insurance with the expectation that it will come to our aid after an accident, whether to pay for vehicle repairs or to help ease the financial burden of personal injury. But sometimes things don't go our way and a claim is denied, which is not only aggravating and time-consuming, but also costly.

Even if you've done everything correctly, your claim may still be denied. If this occurs, you have a few options. To begin, every insurance company has an internal appeals process available to policyholders, and if you believe your claim was treated unfairly, you can formally request an appeal of the decision. If that is also denied, you should consider contacting your state's insurance department to file a complaint, as well as possibly contacting a lawyer.

The National Association of Insurance Commissioners, for example, provides a comprehensive list of each state's insurance department and important contact information here. Finally, you cannot rely solely on what your insurance company tells you. Because this is your life, your car, and your future, you must conduct your own research, keep your own records, and seek outside, independent opinions. Learn how to appeal a denied auto insurance claim if you believe your claim should have been approved.

Common Reasons an Auto Insurance Claim was Denied

  1. The accident was your fault:

Sometimes the flaw is obvious. For example, if you cause an accident because you ran a stop sign or were intoxicated, your auto insurer will not pay. However, there are some cases where fault is a tricky beast.

Let's say you're stopped at a red light between two cars. The car in front of you is suddenly rear-ended, resulting in a chain reaction that ends with you hitting the bumper in front of your vehicle. That hit is on you, according to your insurer.

"Consumers are always irritated by this," Lynch says. "But the fact is that you collided with the car in front of you." And your insurance company will claim that you were not at fault for starting the chain of events, but that if you had backed up further, you would not have hit the other driver's bumper."

  1. Auto insurance coverage limits were met:

Every auto insurance policy specifies the amount that will be paid out for various types of claims, and understanding these limits is critical.

Assume a driver collides with your $150,000 sports car and totals it. You assume the damages will be covered — until you discover the at-fault driver has a $50,000 property damage limit. In this case, you could be $100,000 in the hole.

"This is why uninsured and underinsured motorist coverage is critical." "Too many drivers don't realize this until it's too late," says Amy Bach, executive director of the nonprofit consumer advocacy group United Policyholders in California. "It's also critical to understand the coverage limits on your own policy."

  1. The driver was not named on the insurance policy:

Linda Schmidt was a passenger several years ago while her 16-year-old daughter was behind the wheel logging valuable driving time with her learner's permit. Schmidt's daughter failed to stop in time and rear-ended another vehicle at an intersection that afternoon. When they attempted to file a claim, Schmidt's insurer informed them that the accident would not be covered because the Schmidts had not informed the insurer that the 16-year-old would be driving the vehicle. "If anyone in your household will be driving your vehicle, he or she must be named in the policy," Lynch says.

  1. You were using your vehicle for business:

Assume you are a freelance graphic designer who frequently uses your vehicle to deliver prints to clients. You must notify your insurer that you occasionally use your car for business purposes. Otherwise, even minor accidents may not be covered. "Your insurance company will inquire as to what you were doing at the time of the accident. And if you claim you were delivering prints to a client but the insurer had no idea you were doing so, your claim may be denied," Lynch says.

How to File an Auto Insurance Claim the Right Way

Any accident can result in a stressful and intimidating situation. However, it is critical that you keep a level head because how you handle the claim process can make or break whether or not you are covered.

  1. Take photos and document everything:

Immediately after an accident, you should begin documenting the situation, which includes taking as many photos as possible of the damage to your car, damage to other cars, and the overall accident scene.

"Even if you're injured, try to get someone else to take your photos," Bach advises. "It is always preferable to gather your own evidence rather than rely on that of others." Furthermore, keep all documentation pertaining to injuries and vehicle damages.

"Many people will try to just say they suffered a loss, like their bumper was crushed or their neck hurts, but they don't have documentation to back it up," says Sally Morin, a personal injury attorney in San Francisco who focuses on auto accident cases. "In order to be paid, you must submit all records and billing, which means you must be very detailed in obtaining and keeping all documentation related to the accident."

  1. Never admit fault:

Sure, the specifics of an accident can be hazy and perplexing. Sure, you might be confused about who was to blame. You should, however, never admit fault. "It is critical to establish that the other driver, not you, was at fault for the accident," says Washington, D.C.-based attorney Tom Simeone. "In some states, if you are even 1% at fault, you cannot recover on a claim." Saying you were — or might have been — at fault can seriously harm your case. Even if you later try to change it, that statement can be used against you."

  1. Never admit to being uninjured:

Adrenaline is a powerful chemical that can frequently mask injuries at the scene of an accident that we would otherwise notice a few days later. "A lot of times, people will have an accident and walk away feeling fine, but signs of injury can begin to appear over a period of days, and sometimes even weeks," says personal injury lawyer Craig Miller, adding that insurance adjusters have "all sorts of tricks" they employ to get you to admit that you weren't injured.

"They might call and ask, 'How are you doing today?' You may respond casually that you're fine, and they may be able to use that as evidence that you weren't injured in the accident," Miller says. Even if you are in pain, do not tell the adjuster. It is possible that you have a "masking injury."

"For example, you may feel pain in your neck, but that is not the primary injury," says Robert Katz, an Atlanta-based personal injury attorney. "It may only be masking the pain you'll feel in your back a few days later." However, if you only mention the neck pain, you may be denied compensation for the back pain later on."

  1. Don’t sign anything and don’t consent to being recorded:

Never sign a medical authorization form allowing your insurance company to collect your medical records. If you are filing an injury claim without hiring an attorney, it is a good idea to gather your bills and records after you have finished being treated.

Furthermore, if another driver's adjuster contacts you and requests that you record the conversation, you should politely decline.

"Drivers are advised to avoid giving recorded statements, which most adjusters require," says Jordan Perch, driving expert and DMV.com blogger. "If the adjuster is permitted to record the conversation, he or she may later use the tape to try to find potential flaws and inconsistencies in the driver's statement that could lower the value of his or her claim." The law does not require drivers to provide recorded statements."

Simeone, on the other hand, points out that you have a duty to comply with your own insurance company, so if they want to take a recorded statement, you must comply in order to maintain coverage.

  1. Don’t let the auto insurance adjuster rush you:

You have the right to a detailed and thorough claim process, so make sure the adjuster does not intimidate you. Furthermore, don't automatically accept the first appraisal that comes in.

"You may want to settle things as soon as possible," Bach says, "but there's probably more money available from the insurance company than the adjuster is offering at first." "Their first offer is almost never their best offer, so if you think you can negotiate for more, you should."

  1. Don’t assume your insurer is your friend:

According to Simeone, every statement made to an insurance company, including your own, is not protected by attorney-client privilege, which means that the adverse insurance company can obtain any statements you made to your own insurance company with a letter or, if litigation occurs, a subpoena.

Furthermore, if the at-fault driver lacks insurance or loses coverage for any reason, your own insurer may be required to pay claims on his or her behalf.

"That means your own insurance company could end up being against you in the sense that it wants to pay you as little as possible," Simone explains. "This is yet another reason why you should not rely solely on your insurance company for advice."

  1. Only answer the question asked:

An insurance adjuster will ask you more pointed questions about the nature of the accident, in addition to the standard questions about the nature of the accident. For example, who, in your opinion, had the last chance to avoid the accident?

"They ask this because even if the other driver hit you, you could still be held partially responsible if you had a chance to avoid the accident at the last second," Lynch explains.

If this is brought up, Lynch suggests the following response: "I'm assuming the person who hit me had the last chance to avoid the accident."

Lynch advises that you should always be honest, but don't volunteer any more information than is absolutely necessary because you never know what it will be used for in the future.

"Don't tell them how to build a clock if they ask what time it is," Lynch advises.