What If Your Insurance Company Denies Your Claim?
Source: Ventura County Star

Insurance has become a vital part of our everyday lives. We need insurance for our health, cars, homes and businesses. When we buy insurance, we buy a promise from the insurance company to protect us. Sometimes insurance companies forget that promise. Why? Insurance companies are in the business of making money. Insurance companies make money by selling insurance policies. Insurance companies lose money by paying claims. So we must expect that insurance companies will deny our claims whenever and wherever possible.

An insurance policy is a legal and binding contract between you and your insurance company. You have contractual rights and can enforce those rights against your insurance company. Usually, our insurance policies are long and complex. Even with a dictionary, it is difficult to understand exactly what the policy covers and what it does not. This is because insurance policies are mostly standardized forms created by insurance companies, brokers and attorneys. Nevertheless, that complex language sets forth rules that all insurance companies must follow.

An insurance company must perform each and every written obligation in the policy. California courts have made it clear that insurance policies are broadly interpreted according to the plain meaning of the terms. And where those terms are confusing or ambiguous, the policy will be interpreted in favor of you, the policyholder. On the other the hand, exclusions and limitations in the policy, which can result in a denial of a claim, must be clear and unmistakable. Exclusions and limitations must be interpreted as narrowly as possible. Essentially, when it is a toss up, courts will find coverage in favor of the policyholder. Courts try to protect our reasonable expectations.

A “bad faith” lawsuit against an insurance company is sometimes a policyholder’s only option when a claim is wrongfully denied. It is not necessary to prove that the insurance company intended to cause harm. Rather, it is only necessary to prove only that the insurance company failed to fulfill its promise(s) and had no valid reason to decline payments rightfully due under the insurance policy.

Courts recognize that we may suffer financial pressure and emotional distress if a claim is not paid, and that we are vulnerable to oppressive tactics by insurance companies. It is presumed that a denial of insurance benefits will cause the insured emotional distress. As such, an insured can recover all damages caused by the insurance company’s “bad faith.” This includes money owed, loss of use of insurance proceeds, general damages, mental anguish, attorneys’ fees and, in cases of extreme and outrageous misconduct, punitive damages.

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