Insurance claim denial: What you should know

Published on March 17, 2015, by Matthew Sharp


Insurance claim denial: What you should know

When Nevada residents purchase an insurance policy, they may feel a sense of security knowing that they have financial coverage should a tragic accident occur. In exchange for a monthly premium, policy holders enter into a relationship with the insurance company, who is legally obligated to uphold their promise to provide assistance if needed. Yet, some insurance policyholders may be surprised when a legitimate insurance claim is denied by the very company that promised to protect them and look out for their best interests.

Understanding insurance bad faith

Under the law of duty of good faith and fair dealing, insurance companies are required to treat their policyholders fairly in regards to providing reasonable compensation in a timely manner. In Nevada, when an insurance company denies insurance benefits to a policyholder without good reason, they are acting in bad faith by failing to perform the duties that they had promised earlier.

In 2009, a man who was pushing his friend’s car off of the road after it had been involved in an auto accident, was hit and injured by an uninsured driver, according to The Times-Tribune. As a result of the accident, the man lost his right leg. After his initial insurance claim denial for $250,000, the man sought a bad faith claim against the company for wrongful denial. He was awarded $22 million for the case.

Seeking punitive damages

According to Nevada statute, policyholders may be able to seek punitive damages if an insurance company has failed to treat them in a fair manner by engaging in any one of the following:

  • Delaying a payment for an unreasonable amount of time.
  • Interpreting the terms of the insurance policy in an irrational manner in order to reduce the amount of money owed to the policyholder or to deny the claim altogether.
  • Refusing to settle an insurance claim.
  • Unjustly denying insurance benefits.
  • Failing to reimburse the insured for the entire amount that is rightfully owed to them under their specific plan.

A denied insurance claim can be extremely frustrating for people who are in desperate need of compensation from their insurance company.

In order to file for punitive damages in Nevada, the policyholder must have proof that they entered into a contract with the insurance company and had a valid claim that should have been covered under the scope of their policy. They must also show that despite their attempts to receive compensation, the insurance carrier denied the claim or acted in an irrational manner. As a result of the denied claim, the policyholder may be financially responsible for unpaid medical care expenses.