Failing to Explain a Denial

When a policyholder files a claim with their health or life insurance company, they expect a fair evaluation and a clear explanation if their claim is denied. Unfortunately, some insurers engage in practices that fall short of this expectation, including failing to promptly explain the reasons behind a denial. In California, this failure can constitute bad faith, giving policyholders the right to challenge the insurer’s actions under state law.

If your insurer is failing to follow the law or is acting improperly or unreasonably regarding your life or health insurance claim, contact Gianelli & Morris for a free case evaluation with a skilled and knowledgeable California insurance bad faith lawyer.

An Explanation of Bad Faith Insurance Practices in California

Insurance companies have a legal duty to act in good faith when dealing with their policyholders. This means they must handle claims fairly and promptly, provide accurate information, and uphold their end of the contract. When insurers fail to meet these obligations, they can be found to have acted in bad faith, which can lead to legal consequences. In such cases, insurers can be liable for the financial cost of any damage they have caused, including physical harm and emotional distress, as well as punitive damages.

One specific area where bad faith can arise is in the failure to explain a claim denial. Under California Insurance Code 790.03(h)(13), an insurance company is prohibited from “[f]ailing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.” This provision is designed to protect policyholders from being left in the dark about why their claim was denied or settled for less than they believe it is worth.

The Importance of Timely and Clear Communication

A prompt and clear explanation for a claim denial is essential for several reasons:

1. Transparency: Policyholders have the right to understand why their claim was denied. This transparency is crucial in helping them decide whether to accept the decision, appeal it, or seek legal recourse.

2. Prevention of Further Harm: A delayed explanation can leave policyholders in a vulnerable position, potentially leading to additional financial or medical hardships as they try to navigate the next steps without knowing the reasoning behind the denial.

3. Legal Compliance: California law mandates that insurers provide a reasonable explanation for a denial. Failure to comply with this requirement can expose the insurer to claims of bad faith and potential penalties.

Time Period for Responding to an Inquiry or Grievance in California

In California, insurers are also required to adhere to specific time frames when responding to communications or complaints from policyholders, including grievances related to claim denials. California Code of Regulations, Title 10, Section 2695.5, deals with “any communication from a claimant, regarding a claim, that reasonably suggests a response is expected.” Insurers are required to give the claimant a “complete response” based on the facts as then known. This response must be provided “immediately, but in no event more than fifteen (15) calendar days after receipt.”

That provision of the law deals with communications generally, but a separate section of California law deals specifically with customer complaints. Insurance companies are required to send a written acknowledgment that they have received the complaint within five days. Insurers are further required to resolve a grievance within 30 calendar days of receiving it. This response must include a clear and specific explanation of the reasons for the denial if the grievance is not resolved in the policyholder’s favor. Urgent grievances must be resolved in three days.

If the insurer fails to provide a timely and adequate response, it may be considered a violation of the law, further supporting a claim of bad faith. This is particularly relevant in cases where the delay or failure to explain the denial aggravates the policyholder’s financial or health-related difficulties.

Legal Recourse for Policyholders

When an insurer fails to promptly and adequately explain a claim denial, the policyholder may have grounds to file a bad faith insurance lawsuit. In such cases, the policyholder can seek compensation for the benefits wrongfully denied, as well as additional damages for the emotional distress and financial losses caused by the insurer’s bad faith actions. Punitive damages may be appropriate as well.

At Gianelli & Morris, we understand the challenges policyholders face when dealing with bad faith insurance practices. Our firm is dedicated to holding insurers accountable for their obligations under the law and ensuring that policyholders receive the benefits they are entitled to. If you believe your insurance company has acted in bad faith by failing to explain a claim denial, we are here to help you fight for your rights.

Contact Gianelli & Morris for Help With Improperly Denied Insurance Claims in California

Failing to explain a denial is not just a minor oversight—it can be a serious violation of California law that leaves policyholders at a significant disadvantage. If you have been denied a claim without a reasonable explanation, contact Gianelli & Morris today at 213-489-1600 to discuss your legal options. We are committed to ensuring that insurance companies fulfill their promises to policyholders and are held accountable when they do not.