Why Claims Are Often Denied By Insurers

Claims are often denied by insurers for a variety of reasons. They may have been denied for anything from non-disclosure of material fact through to fraud or over-capitalisation of loss. Interestingly, there has been a fundamental change over the last ten years in the approach taken by insurers with the denial of claims. Although many of them assert that they would rather pay a claim than deny it, there are still many insurers out there who frequently deny claims for a variety of reasons some of which lack legal substance. Over the last year we have helped a number of clients have claims accepted where they were previously denied. These claims have involved denials for storm damage, burglary, fire, theft, malicious damage, building defects, motor vehicle theft claims and other causes.

1. Storm Damage

An insurer attempted to deny a claim for storm damage based on blockage of gutters by roof debris including leaves indicating the place was not kept in good order, condition and repair.

2. Burglary

An insurer refused to pay a client’s claim for burglary because they believed that a key had been used to manipulated a lock and therefore there had been no breaking and entering which meant that the relevant policy conditions had not been triggered.

3. Fire Claims

Insurers refused to grant indemnity in circumstances where our client’s business premises had been fire-bombed and thereby totally destroyed. Unfortunately his former solicitor succeeded in alienating both the insurance investigator and loss adjuster which meant the claim was denied further complicating the situation.

4.Theft Claims

Frequently where burglary and theft claims are involved there is a tendency by insureds to inflate the actual amount of the claim and where this is detected insurers often refuse to pay the claim for fraud or over-capitalisation of loss. There are a myriad of matters which have come to our attention where this has been the case, where the insurer has failed to understand the basis of the insurance contract which they have issued and to apply the Insurance Contracts Act in the circumstances.

5. Malicious Damage

In the normal course malicious damage is covered under most insurance contracts however clients sometimes become confused because they believe malicious damage caused by tenants is recoverable under a policy of insurance. Unfortunately this is not the case unless it related to malicious damage caused by a former tenant who returns to the premises after they have been relet to someone else and if discovered there would be a right of recovery against that person/s.

6. Building Claims

Often building claims are denied by insurers because of issues associated with defects. This is not where there are defects caused during the course of construction as they fall to be considered under a different part of the law. Originally building and construction defects to domestic premises were covered under building warranty or home warranty insurance policies, however this is no longer the case as these policies now only cover the death, disappearance or insolvency of the builder.

Apart from this there may be inherent defects or defects which develop in a building over the years and these fall to be considered separately from the above. The real question in these circumstances is the state of knowledge of the insured which is often overlooked by insurers before they have taken a decision to deny claims.

It should also be pointed out that where damage has been occurring over time to a building and the insured has failed to take corrective action to mitigate the problem then the insurer could be well within their rights to refuse to pay the claim.

7. Motor Vehicle claims

Due to the enormity of the volume of motor vehicle claims sometimes they are denied for insufficient reason. One of the reasons which motor vehicle insurers find seductively appealing when denying motor vehicle theft claims comes back to how, when and why it was reported; the method and means employed by the insured to recover it; the insured’s movements for at least 12 hours prior to the time of loss; and the place from which it was stolen to name but a few. Suffice to say that these denials are often misconceived, lack legal substance and normally involve situations where insufficient material has been obtained by the insurer before refusing the claim.

8. Total and Permanent Disablement Claims

We have helped clients who have been in real danger of being evicted from their homes by banks for arrears for mortgage payments brought on by their incapacity to work. Sometimes where they may be entitled to a permanent disablement claim it will bog down where they are being stonewalled by the insurer.

9. Lane Cove Tunnel collapse

In this case we were brought in by a client to undertake negotiations with the tunnel developer following structural damage to their unit.

10. Disputes with Insurers

It should be remembered that both insured and insurer have a mutual duty to act with the utmost good faith one to the other. Pursuant to the Insurance Contract Act the proposed insured has a duty of disclosure. Generally before entering into a contract of insurance, renewing cover or making a claim the insured must tell the insurer everything that he or she knows or could reasonably be expected to know that is relevant to the insurer deciding to provide insurance cover or indemnity for a claim. The operative words are “what is relevant” and unfortunately this is often misunderstood by those involved in the claims process which can lead to a denial.

11. Professional Negligence Claims

We are dealing with an increasing number of professional indemnity claims against solicitors. Often these arise out of failure to properly advise their clients or where statues of limitation and staff issues intrude. Obviously there is a tension between properly advising a client and what a client can afford given the circumstances of each particular matter. Irrespective your former solicitor would have been under a duty of care to act at all times in your best interest in the provision of his/her professional services to you. Where your former solicitor has acted outside widely accepted peer professional opinion in the provision of services to you then you may have a claim for professional negligence against your solicitor. In all of these circumstances the plaintiff has to be able to provide that they suffered real damage and mere inconvenience is insufficient.

In all of these cases we have achieved success on behalf of clients which has led insurers to finally accept their claim by either cash settling or rectifying the damage. There are very few lawyers who possess the fundamental knowledge allowing them to properly represent clients with respect to property damage claims. In addition the same can be said about disability or partial or temporary disablement claims. Should you have a claim which you believe is likely to be denied or where it has in fact been denied by your insurer you should contact LAC Lawyers to investigate the matter so that we can establish whether there is a proper legal basis to pursue it. If so we would be happy to represent you to pursue a reversal of your insurer’s decision to get the claim paid. We do not accept instructions in matters below $20,000 or on a no-win-no-fee basis.