According to the Insurance Information Institute, roughly 4.5 percent of drivers with collision insurance coverage had a successful claim in one recent year. For claims involving bodily injury, the average value was $26,501.
As Alabamians, we trust insurance companies to be there for us when accidents happen because of someone else’s carelessness. We also know the sinking feeling of having an insurance claim denied. However, not all denials are justified or legitimate, and there are avenues for you to file an appeal.
Why do insurance companies deny claims? Learning the answer to this question can help you protect your rights.
Can Insurance Companies Deny a Claim?
Yes, insurers can deny claims in Alabama. However, their reasoning must be supported by a contract condition, policy exclusion, or state law. This applies to both first-party claims from a company’s own policyholders and third-party claims from someone injured by a policyholder.
Each insurance company in Alabama must meet specific obligations outlined in the law:
- They must acknowledge each claim within 15 days, according to Chapter 482-1-125 of the Alabama Administrative Code.
- They must conduct a reasonable investigation.
- They must regularly communicate the status of a claim.
- They must issue a decision on each claim within 30 days or as specified in the policy.
On the flip side, policyholders also have specific responsibilities they must follow when working with an insurer:
- You must provide timely notice of a claim.
- You must cooperate with the insurer’s investigation.
- You must not impair the insurer’s subrogation rights.
Can insurance deny a claim “just because?” Absolutely not. According to Section 27-12-24 of the Code of Alabama, an insurance company cannot refuse to pay or settle a claim without giving justification. The state considers this a bad-faith tactic, and you may have a civil case against a company that practices it.
Top Reasons Why Insurance Claims Are Denied
These are some of the most common reasons why insurance companies in Alabama deny claims. By knowing them ahead of time, you can prepare a stronger claim.
Late or Improper Notice of Claim
Alabama generally follows the no-prejudice rule for most insurance claims. This means that insurers can legally justify a denial if there was an unreasonable delay in reporting the accident. The rule applies even if the insurer can’t prove any harm because of the delay. Courts consider factors like the length of the delay and why it happened to determine if a denial was justified by the no-prejudice rule.
The exception is uninsured motorist (UM) claims, which follow the “notice-prejudice” rule. Under this standard, insurers must prove they were harmed by the delay for a denial to be justifiable.
Lack of Coverage, Policy Lapses, and Cancellations
If your liability insurance was previously canceled or lapsed due to nonpayment, you might not have coverage at the time of the accident. Insurers must give proper notice before a cancellation or nonrenewal.
To protect your legal position, check your policy documents for effective dates, and always pay premiums on time. If you receive a cancellation notice, review it carefully and ask your legal team any questions.
Exclusions and Non-Covered Use
Your insurance documents should outline exclusions, which are types of incidents that your policy doesn’t cover. Some typical auto liability exclusions include:
- Intentional acts
- Damage you caused to your own car
- Racing
- Illegal activity
- Normal wear and tear
- Unapproved modifications
- Damage caused by a driver you choose to be excluded (“named-driver exclusion”)
- Catastrophic events/”acts of God”
Personal insurance also excludes coverage when you are using your personal vehicle for business purposes or gig work. Many employers fill in the gap by providing commercial insurance for their drivers. App-based rideshare and delivery businesses may also have group liability insurance to cover drivers actively using the company’s system to complete jobs.
Material Misrepresentation
Section 27-14-7 of the Code of Alabama allows insurers to deny a claim for misrepresentations made when you applied for the policy. This can include omitted, concealed, or incorrect information about any of the following:
- Your driving record
- The use of the vehicle at the time
- Other material facts related to the accident
Even an innocent misrepresentation can lead the insurer to deny a claim, as long as the statutory criteria are met.
Post-Loss Misrepresentation or Fraud
Proof of loss is the document that states how much money you’re requesting from the insurer. If someone intentionally misrepresents information related to the claim in their proof of loss, the insurer can issue a denial.
Section 27-14-28 of the Code of Alabama requires actual intent to deceive for the denial to hold. An honest mistake typically won’t void a claim, though the insurer may ask for further clarification.
Failure to Cooperate with Investigations or Documentation Requirements
Once you file your claim, the insurer will begin its investigation. As the policyholder, you must cooperate with this investigation to avoid a denial.
Insurers may ask for supporting documentation on the nature of what happened and the value of your losses. They may also ask for an examination under oath. Your lawyer can gather the proper evidence, advise you on statements you are asked to give, and accompany you to depositions as necessary.
Settling Without Preserving UIM Insurer’s Rights
If you’ve filed an underinsured motorist (UIM) claim and want to accept a settlement from the at-fault driver’s insurer, you must notify your own insurer of the proposed amount. If they choose to accept the settlement, they may proceed with either of these two actions:
- Waiving subrogation – Your insurer chooses not to subrogate, and the responsible driver’s insurer pays the settlement amount directly to you.
- Fronting the settlement – Your insurer pays you the settlement amount and then seeks reimbursement from the at-fault driver over time.
This process is called the Lambert procedure, named for the Alabama Supreme Court case Lambert v. State Farm (1991). If you don’t notify your insurer before accepting a UIM settlement, your claim will likely be denied.
Disputes Over Shared Responsibility
Alabama is a pure contributory negligence state. This means you cannot recover damages in a personal injury lawsuit if the court finds you were even 1 percent responsible for the accident.
While this standard applies to litigation, insurance companies may also follow it and deny your claim if they find you partially responsible.
Guest-Passenger Statute Issues
Code of Alabama Section 32-1-2 is the state’s guest-passenger statute. Suppose you were injured as a non-paying passenger of the driver who caused the accident. In that case, you can only recover damages if you can prove the driver committed willful or wanton misconduct. This is a serious level of negligence that can include:
- Drunk driving
- Racing
- Speeding excessively
- Reckless driving
Courts do not deem acts of “ordinary negligence,” such as unsafe lane changes, sufficient under the statute.
This statute applies to personal injury lawsuits rather than insurance claims, just like contributory negligence rules. However, insurers may follow the standard and deny your claim if they believe there was no willful or wanton misconduct.
What to Do If Your Insurance Claim Is Denied in Alabama
If you receive a denial letter, do not panic. Instead, follow these steps to learn more about the denial and begin preparing an appeal if necessary:
- Review the letter – Denial letters contain a wealth of information for you and your legal team to use later, including information on the appeals process.
- Understand the insurer’s stated reason – Alabama requires insurers to cite the specific policy provision that supports each denial. Look carefully for this language and ask your Birmingham car accident lawyer any questions.
- Gather supporting documentation – Collect medical records, repair estimates, photos from the accident scene, witness statements, and other supporting evidence.
- Contact the claims adjuster for clarification – The adjuster investigating your claim can tell you more about the denial and what additional information may be necessary. Your lawyer may make this call on your behalf. However, if you will be speaking with the adjuster, remember that everything you say may be recorded. It’s best to consult your lawyer first to protect your rights.
- File an internal appeal – Your lawyer will prepare a written appeal with supporting documentation, following the procedures outlined in your policy.
- Consider legal action if appropriate – Depending on the denial’s circumstances, you may have grounds for a breach of contract claim, declaratory judgment action, or bad-faith lawsuit. Your lawyer may also file a Consumer Complaint with the Alabama Department of Insurance.
If you were injured in a car accident and your claim is denied, you deserve a skilled attorney to navigate the appeals process for you while you focus on your medical recovery. Contact the Alabama car accident lawyers of Collins Law, LLC for a free consultation.
How to Appeal a Denied Insurance Claim
The appeals process for a denied insurance claim starts with a written request for reconsideration. This should include all of the following:
- The claim number and denial date
- The specific policy provisions the insurer cited to explain the denial
- Your explanation of why coverage should apply
- Supporting documents to address each reason for denial as directly as possible
Having your legal team prepare the request for reconsideration can strengthen your appeal. An experienced attorney can analyze Alabama case law as it applies to your situation and spot “red flags” indicating an insurer is acting in bad faith.
The specifics of the appeals process may vary from company to company. However, you should always follow these best practices:
- Meet all policy deadlines – Missing a deadline could result in a lost appeal.
- Keep communications in writing – Written communications are easier to look back on. If an insurer acts in bad faith, your lawyer may also use these communications to hold them accountable in court.
- Watch what you say – Do not make any verbal statements, written statements, or social media posts that an insurer could interpret as an admission of fault.
When to Contact a Lawyer for a Denied Insurance Claim
While some insurance appeals can be straightforward, others are best handled by legal professionals. Consider seeking a car accident lawyer in any of these situations:
- The insurer issued a denial with no reasonable basis.
- The insurer didn’t identify specific policies supporting the denial.
- The insurer ignores regulatory timelines.
- There is a dispute over liability.
- The insurer is failing to investigate the claim according to its legal obligations.
- The insurer misrepresented its own policy when issuing the denial.
- You’re filing an underinsured motorist claim.
Alabama has set a two-year deadline to file bad-faith tort claims and a six-year deadline for breach of contract claims. These claims take time to prepare and won’t be “ripe for pursuing” until you’ve established liability for the original accident. The sooner you seek legal advice, the more time they’ll have to plan the best strategy for your case.
Preventing Denied Insurance Claims: Tips for Alabama Policyholders
The claims process can be unpredictable, and avoiding denials and appeals is not always possible. However, you can increase the likelihood of an accepted claim by following these tips:
- Understand your insurance policy – Know your policy’s liability limits, coverage types, and exclusions.
- Keep thorough records – Keep records of everything related to your policy and any incidents that may be covered under the policy. Take photos, save receipts, keep medical records, and retain copies of correspondence with the company.
- File claims immediately – Alabama’s no-prejudice doctrine is far from forgiving, and a delay can jeopardize your benefits even if there was no harm to the insurer. Protect your rights by starting the claims process immediately after the accident.
- Be truthful and complete – Always tell the truth in your applications and claim reports, and don’t embellish, exaggerate, or speculate. Deliberate post-loss misrepresentations, and even some honest misstatements, can lead to a denial.
Contact an Alabama Accident Claim Attorney
If you’re facing a denied insurance claim after being injured in a car accident, you can trust the Birmingham team at Collins Law, LLC, to faithfully fight for you. Founder April Collins has over 15 years of experience and has been recognized as one of the “10 Best Personal Injury Attorneys” by the American Institute of Personal Injury Attorneys. We strive to update each client regularly on their case’s progress and always treat them with the empathy and dignity they deserve. Contact our office today for a free consultation about your insurance or personal injury claim.
