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Understanding Insurance Litigation: What Policyholders Should Know When an Insurance Claim Is Denied

Fact-Checked

This page has been researched, written, and reviewed in accordance with our editorial guidelines to ensure accuracy and relevance. This page has been reviewed and approved by Founding Partner, Tobias Licker. The last updated date reflects the most recent review of this content.


Most people purchase insurance with the expectation that their insurer will provide financial protection when an unexpected loss occurs. Whether the claim involves property damage, a vehicle accident, business interruption, or another covered event, policyholders often rely on their insurance company to honor its obligations under the policy.


Unfortunately, disputes between insurance companies and policyholders can arise. When these disputes cannot be resolved, insurance litigation may become necessary.


What is Insurance Litigation?

Insurance policies are legally binding contracts. When questions arises regarding coverage, policy interpretation, or claim handling, litigation may be necessary to determine the rights and obligations of the parties involved.


Insurance litigation may involve individuals, businesses, property owners, or other insured parties seeking to enforce their rights under an insurance policy.


Common Reasons Insurance Claims Are Disputed

Insurance dispute can arise for many reasons, including:


  • Claim denials

  • Delayed claim investigations

  • Delayed payment of benefits

  • Underpayment of claims

  • Coverage disputes

  • Policy exclusions

  • Alleged misrepresentations in insurance applications

  • Disputes regarding the value of damages

  • Bad faith claim handling


While not every denial is improper, policyholders should carefully review any denial or reservation of rights issued by an insurer.


What Is a Reservation of Rights Letter?

A reservation of rights letter is a notice from an insurance company indicating that it is investigating a claim while reserving the right to deny coverage at a later date.


Receiving a reservation of rights letter does not necessarily mean a claim will be denied. However, it may indicate that the insurer believes there are coverage issues that require further review.


Policyholders who receive such letters should not carefully review the contents and consider seeking legal guidance regarding their rights.


Understanding Bad Faith Insurance Claims

Insurance companies owe certain duties to their policyholders when handling claims.


In some situations, an insurer's conduct may go beyond a simple coverage dispute and potentially constitute bad faith.


Examples may include:


  • Unreasonable claim delays

  • Failure to conduct a proper investigation

  • Failure to communicate with the insured

  • Misrepresenting policy provisions

  • Refusing to pay a valid claim without a reasonable basis.


Bad faith laws vary by state, and the facts of each case must be carefully evaluated.


What Evidence May Be Important in an Insurance Dispute?

Successful insurance litigation often depends on the available evidence.


Important documents may include:


  • Insurance policies

  • Claim submissions

  • Correspondence with the insurer

  • Emails and written communications

  • Photographs and videos

  • Repair estimates

  • Expert reports

  • Financial records

  • Investigation reports


Maintaining organized records can be critical when pursuing an insurance claim or challenging a denial.


What Should You Do If Your Claim Is Denied?

If an insurance company denies your claim, consider taking the following steps:


  1. Carefully review the denial letter.

  2. Obtain a complete copy of the insurance policy.

  3. Gather supporting documentation.

  4. Preserve all communications with the insurer.

  5. Request clarification regarding the denial.

  6. Consult an attorney experienced in insurance litigation.


A denial does not automatically mean the insurer's decision is final. Depending on the circumstances, policyholders may have the options to challenge the decision.


Insurance Litigation in Missouri and Illinois

Insurance laws vary significantly from state to state. Missouri and Illinois each have their own statutes, regulations, and legal precedents governing insurance disputes and claim handling practices.


Understanding how these laws apply to a specific claim of the policy language and surrounding circumstances.


Protecting Your Rights as a Policyholder

Insurance policies are designed to provide protection during a difficult situations. When disputes arise regarding coverage, benefits, or claim handling, policyholders should understand their rights and available legal options.


At A & L, Licker Law Firm, LLC, represent individuals and businesses throughout Missouri and Illinois in insurance disputes and insurance litigation matters. Our team works to help policyholders understand their rights and pursue appropriate legal remedies when coverage disputes occur.


References


DISCLAIMER: This article is for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Laws change regularly and the application of any rule depends on the specific facts of each case. For guidance regarding your specific situation, please contact A & L, Licker Law Firm, LLC directly.



 
 
 

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