Life is unpredictable. Accidents happen, misfortune strikes and sometimes we are at the mercy of Mother Nature. For most Australians, insurance is a necessity, and prepares them for any number of unfortunate events.

From car accidents and natural disasters to personal injuries and income protection, you can insure almost all aspects of your life, including death. When your house is flooding or you’re watching your car being towed away, it’s always comforting to think, at least you’re insured…or are you?

An insurer can reject an insurance policy claim for any number of reasons, but the reason may not always be justified. In these situations the insurance policyholder can contest the rejected claim.

Making an Insurance Policy Claim

In the first place, a policyholder should always check their insurance policy to ensure they have a valid claim, that is, the incident is covered under their relevant insurance policy. The process of making a claim generally involves contacting the insurer directly and lodging an insurance claim.

A policyholder will need to provide information including details of the incident and evidence such as pictures, medical reports or witnesses. Once an insurer has all this information they will begin to assess the claim. The insurer may conduct their own research when weighing up the evidence provided.

It is at this point in the process that the insurer decides if the claim will be accepted or rejected. If the claim is rejected, the insurer will send a ‘declinature letter’ to advise the claim has been rejected and why.

Why is an Insurance Policy Claim Rejected?

There are many grounds for which an insurer can reject an insurance policy claim. Common reasons for rejecting a claim are listed below.

• An insurance company may reject a claim if the damage wasn’t caused by the disaster or incident. For example, an insurer may allege that the furniture or building was already damaged before it was hit by a storm. The insurer would need to have evidence, such as the analysis of an expert, to back up their allegation.
• Contract conditions and exclusion clauses may be grounds for a claim rejection. For example, a home and contents insurance policy may include a condition where deadlocks should be installed on all external doors. If this condition wasn’t met and a robbery occurred as a result, the claim may be rejected.
• If a policyholder fails to disclose information (also known as non-disclosure) an insurer may not uphold the insurance policy. When you take out an insurance policy you have a duty to disclose relevant information. For example, medical history should be advised when taking out life insurance. A policyholder is required to provide accurate and up to date information to their insurer when: they are asked; they find out something that may change the insurer’s decision to provide insurance or the terms of such a policy. For example, a policyholder who finds out there is structural damage to their home.
• If a policy has been cancelled, then any claim made on that policy will be rejected. A policy may be cancelled if there is a payment error or if it hasn’t been renewed. Sometimes a policyholder may not realise their policy has been cancelled until they go to make a claim.
• Where an insurer believes the claim is fraudulent, the claim will be rejected and the policy cancelled. If the matter is serious it may be reported to police for criminal investigation. In this situation the insurer needs to prove that the policyholder intended to deceive the insurer.

Contesting a Declinature Letter

If you’ve made an insurance claim and received a declinature letter, it doesn’t mean you have to accept the insurer’s decision. If you still believe you have a valid claim you can contest the declinature letter. Just like there are many grounds for an insurer to reject a claim, there are many exceptions where a policyholder can challenge a rejection. Below are some exceptions to the common rejection reasons listed above.

• If an insurer alleges that damage wasn’t caused by the disaster or incident, a policyholder can provide counter evidence, such as expert analysis, to prove that the damage did in fact occur during the event.
• If a claim has been rejected on the basis of non-disclosure, policyholders should remember that they are not required to disclose something they don’t know, something that reduces the insurer’s risk, something that is common knowledge, or something that the insurer knows. Under the Insurance Contracts Act 1984 rejection based on non-disclosure is limited. The act places onus on the insurance company to inform of the duty to disclose and failure to do so will mean a claim should be upheld. In some cases the insurer is also at fault if they fail to note a disclosure on the policy.
• A claim can’t be rejected for reason of non-disclosure if the missing information wouldn’t have affected the insurer’s decision to insure the policyholder. Furthermore, where an insurer alleges there is a pre-existing condition, an insured person can produce evidence such a medical reports or building inspections to prove they didn’t know about the pre-existing condition.
• Failure to meet one or more conditions on a policy, by an act or omission, can not be cited as a reason to completely reject a claim. Section 54 of the Insurance Contracts Act allows insurers in these situations to reduce the amount paid to the policyholder based on how the act or omission prejudiced the insurer’s interests. Using the above example of a home and contents insurance policy which requires deadlocks on all external doors, if the house is broken into, but if the thieves break in by smashing through a garage door, the policyholder may be able to argue that the insurer was not prejudiced as failure to meet the condition didn’t contribute to the loss or damage.
• Insurers often investigate for fraud and it can be a common reason for a claim rejection, however an insurer cannot reject a claim by reason of fraud if the fraud was minor and it would be unfair for the the insurer to reject the claim.
• If a policy is cancelled then a policyholder can challenge this if they feel the insurer did not take reasonable steps to inform them of the cancellation.

While the above are just a few grounds for contesting a declinature letter, there are many circumstances under which an insurer’s decision can be challenged. Acceptance isn’t the only option.

Legal Advice

A lawyer can advise if you have grounds to contest your insurer’s decision. In addition to knowledge of the laws and common law cases surrounding insurance claims, a lawyer can examine your policy and the insurer’s decision to determine if you have a case.

Challenging an insurance company can be complicated and time consuming. An experienced lawyer can act on your behalf to contact the insurance company and remedy the situation. In some cases you may need to take legal action against your insurance company.

Taylor & Scott Lawyers have the combined experience and resources to challenge big insurance companies. If we believe you have a case we’ll fight for you to achieve the best possible outcome.

If your insurance company has denied what you believe to be a valid insurance claim contact Taylor & Scott Lawyers using our enquiry form or call 1800 600 664.

At Taylor & Scott “We Care For You”.