When you have an insurance claim, you rightfully expect to be paid promptly. That’s why you pay your premiums, right? Unfortunately, delayed insurance claims are a major problem in the insurance industry. Although there are many excuses for delayed payments, at the heart of the problem is the fact that insurance companies are more profitable when valid claims are delayed. Most people grow tired of the bureaucratic process involved in having a claim properly adjusted, investigated, and paid. While you may believe the problems with your claim may be unusual, it probably isn’t. The reality is a small fraction – think less than 5% – of people fight back against delayed and underpaid claims. The insurance companies know that most people will grow tired of the fight and exploit this fact by dragging claims out.
Most people do not fully realize that an insurance company is legal obligated to pay a claim timely. Policyholders have the ability to press the issue to pressure an insurance company to promptly pay a claim upon receipt of proof of loss. Delayed payment of claims can result in penalties, interest, attorney’s fees, and additional damages. Policyholders who utilize the law to their advantage often get paid significantly more.
WHAT IS A DELAYED INSURANCE CLAIM?
A delayed insurance claim occurs when an insurance company does not pay a policyholder’s claim in a prompt manner. Delayed claims occur in all types of insurance claimant including claims for property damage, death benefits, disability benefits, health benefits, or personal injury damages. The delay may be caused by a number of different tactics employed by the insurance company. These tactics include:
Delays can also result from adjusters failing to properly consider the facts and evidence you have presented to the insurance company. While an insurance company will often tell you they are “looking for coverage,” often times the delay is caused because they are looking for reasons not to provide coverage.
THE LAW REQUIRES INSURANCE COMPANIES TO PROMPTLY INVESTIGATE AND MAKE COVERAGE DETERMINATIONS
Insurance companies have an obligation to promptly investigate claims and to hire necessary experts to reach a conclusion about coverage. The timelines and standards by which an insurance company must investigate a claim vary by state. However, generally your insurance company needs to actively begin adjusting your claim between 14 and 30 days. Failure to initiate loss adjustment in a timely manner may result in penalties or attorney’s fees.
More significant problems tend to arise after the initial loss adjustment. While your adjuster may have conducted an initial inspection or received your claim documents, claims often derail soon after. Examples of how problems may arise include:
THE LAW REQUIRES UNDISPUTED AMOUNTS TO BE PAID PROMPTLY
An insurance company that fails to promptly pay undisputed amount that is owed is in breach of the insurance contract. As an insured who has sustained a loss, death, or disability, it is important that undisputed amounts be paid promptly so you can begin the path to recovery.
Most states have enacted laws that require an insurance company to promptly pay claims or face the prospect of paying penalties. The deadline to pay an undisputed amount normally ranged from 30 to 60 days. In Louisiana, an insurer has 30 days to pay a claim from the date it is aware of the money that is owed. Failure to pay can result in a penalty of 50%. Other states, including Texas and Mississippi, provide interest penalties. Texas’ interest penalty is 18% per year whereas Mississippi provide a 1 ½ percent monthly penalty that increases month-to-month.
Importantly, if your insurance company has also acted in bad faith, you may be entitled to additional damages that are normally much more punitive.
What is considered an undisputed amount?
When dealing with delayed payment claims the question of what is considered an undisputed amount often arises. There is no bright line test to determine what is an undisputed amount. Most insurance claims involve various types of receipts, invoices, or estimates. This may include a medical cost projection, property damage estimate, contents list, or lost wage projection.
What is considered an undisputed amount is different for each case and often depends on the context. For example, let’s say your home is substantially damaged by a fire and the insurance company pays you $40,000.00. A professional estimator inspects the property and says the cost to rebuild and restore is going to actually be $160,000.00. The insurance company refuses to pay anything reasonable as a supplement. In that case, it is very possible that the insurance company failed to pay what would generally be considered a reasonable amount and may owe additional penalties due to its delayed payment.
What Kind of Insurance Policies Have Problems With Delayed Payment
Delayed payments are an issue for all types of insurance. Each type of insurance claim has unique issues impacting whether payment will be made promptly.
Property Damage Delayed Payments: Delayed payments may be caused by delayed, incomplete, or inconclusive inspections. In many cases, insurance companies quickly limit coverage through the improper application of an exclusion or even a hasty denial of a completely legitimate claim.
Disability Delayed Payments: Most disability policies are issued by your employer and governed by federal law. If you have an employed-issued disability policy, bad faith penalties are normally not collectable. All other disability policies will be governed by state law and you may bring a bad faith claim for delayed payment.
Delayed payments on disability policies are often the result of the insurance company or plan administrator’s improper review of your medical history, medical reports, and job description. Insurers will often send a disabled claimant to a physician that will state they are not actually disabled within the terms of the policy. It is not uncommon for the insurance company doctors to be unqualified to render certain types of opinions and in many cases the actual treatment records demonstrate that the insurance company’s basis for denial is bogus. Unfortunately, these types of tactics cause delays at a time when you need compensation because a medical condition is preventing you from working.
Life Insurance Delayed Payments: Many life insurance claims are paid promptly and when they are not it is typically because the insurance company is investigating a basis for denial or because multiple people have claimed a policy benefit.
WHEN TO CONSULT WITH AN ATTORNEY
Each claim is unique. Some delays are normal and explainable. Insurance companies sometimes have to retain experts, obtain records, and fully investigate a claim before money is paid. However, if your claim has been dragging on for a few months, your insurance company may not be handling your claim properly. Again, insurance companies have a duty to adjust and pay claims promptly. While there is some latitude to investigate a claim, there needs to be evidence that your insurance company is moving your claim forward.
If you feel your insurance claim has been improperly delayed, please contact us for a free consultation. We can assist you in evaluating your claim to ensure that you recover the money that is owed to you.