Whether you have suffered a car accident, storm damage, or a medical emergency, most people have straightforward expectations of their insurance companies after a disaster. After all, you paid your premiums, so your insurer should honor its promise. Sadly, too many policyholders are shocked to discover that even valid claims can be delayed, underpaid, or flat-out denied by even the most reputable of insurers.
Understanding why insurers deny claims, what legal protections exist, and how courts interpret “bad faith” can help you push back and secure the benefits you deserve.
Why Do Insurance Companies Deny Claims?
Insurance companies are businesses first. Their profits depend on collecting premiums while limiting payouts. Adjusters are trained to look for ways to minimize or reject claims, and sometimes denials stem from honest disagreements about coverage. But in other cases, insurers take things too far, hoping that policyholders won’t fight back.
Common reasons for denial include:
• Policy exclusions. Every policy has its limits. For example, flood damage is often excluded from standard homeowners’ insurance, requiring a separate policy.
• Disputes over cause. Your insurer might claim that the damage was caused by something you are not covered for. For example, one of the most common arguments is they claim that a damaged roof was not caused by a hail storm, but was instead damaged by regular wear and tear.
• Late reporting. If you do not file your claim punctually, you might legally insurerers may argue that you no longer are entitled to be compensated by your insurer. However, consumers in Colorado may be afforded protections against this type of denial based on recent Colorado case law.
• Alleged misrepresentation. Insurers may argue that you left out information on your application or failed to disclose information that they believe is necessary to evaluate the claim.
• Bad faith tactics. These go beyond reasonable disagreements. An insurer might drag out investigations, ignore evidence, or misinterpret policy language to avoid paying. Sometimes, they don’t timely pay claims they admit are due.
Knowing the difference between a legitimate denial and an unfair one is the first step. This is where legal counsel could help
What Protections Does the Law Provide?
Insurance law is grounded in the principle of good faith and fair dealing. When you buy coverage, you and the insurer enter into a contract. Courts across the country have long held that insurers owe policyholders a duty to handle claims honestly, promptly, and fairly.
Key protections include:
• State unfair claims settlement laws. Nearly all states have regulations requiring prompt investigations, clear communications, and valid reasons for a denied claim or low settlement offer. Specifically, in Colorado, there is a statute that allows you to sue your insurance company if it delayed or denied your claim without a reasonable basis.
• The right to appeal. Policies typically allow the insured party to appeal within the insurance company before having to seek court remedies. Many insurance policies also provide for processes of dispute resolution involving third parties in particular claims.
• Bad faith lawsuits. When an insurer unreasonably denies or delays payment, you may have grounds to sue for bad faith. These cases can allow recovery beyond the original claim amount, including punitive damages in some states.
How Do Courts Define “Bad Faith”?
The meaning of the phrase “bad faith” might be a matter of opinion in personal matters, but in legal ones, the courts identify it according to specific standards. State law varies, but courts generally ask whether the insurer acted reasonably under the circumstances.
Examples of bad faith behavior include:
• Refusing to conduct a proper investigation
• Misrepresenting policy terms or exclusions
• Ignoring evidence that supports insurance coverage
• Unjustly delaying payments
• Offering disproportionately low settlements
What’s the Difference Between Exclusions and Coverage?
Policies are dense documents. They often employ technical terms that make it nearly impossible for non-lawyers or those outside the insurance industry to understand. Despite this, having a basic understanding of your policy is important to know what is covered and what is not. Failure to understand your insurance policy is not a valid excuse. One of the most important ways to begin is understanding the difference between coverage and exclusions.
• Coverage provisions describe what the policy protects. For example, auto insurance covers damage from collisions, theft, or vandalism.
• Exclusions carve out exceptions. The same policy might exclude coverage if you were driving under the influence, using the car to further a crime, or using your car for commercial purposes. There are often far more exclusions than there are coverages.
Insurers sometimes blur these lines when denying claims. For instance, a homeowner policy may cover water damage but exclude “flooding.” The company might try to stretch that exclusion to deny a claim caused by heavy rains, even though that is different from a “flood.” Courts often step in when exclusions are applied too broadly.
How You Can Strengthen Your Claim Before Trouble Starts
One of the smartest ways to avoid a claim dispute is to prepare before anything goes wrong. Insurance companies often rely on vague policy language or missing paperwork to justify denials. You can reduce their leverage by being proactive.
Start by reviewing your policy now, not after a loss. Know what is covered and what is excluded. If anything is unclear, ask your agent for clarification and keep notes of what you are told. If they are not able to explain certain policy provisions, don’t stop there; reach out to an attorney to have them review your policy and provide opinions on common issues and making sure you are covered where you need to be. Don’t rely on an insurance company telling you that they’ll tell you what you need.
Next, document what you own. Take photos of your home, car, and valuables and update them regularly. It is also good to get your home inspected towards the beginning of each year so any damage can be documented, but importantly documenting the lack of damage. Keep receipts and repair records in a safe place. For medical insurance, maintain copies of bills and reports. If you suffer a loss, this evidence can ensure your claim is compensated properly. Without this evidence, it is possible that your valuables are replaced with cheap alternatives, rather than what you are truly owed.
When you file, act promptly and keep good records. Report the claim quickly, provide complete information, and save all emails and letters from your insurer. Keeping a simple claim diary (dates, times, and who you spoke with) can prove invaluable if the company drags its feet.
What Steps Can Policyholders Take After a Denial?
A claim denial isn’t the end of the road. If you believe your insurer has acted unfairly, you can take proactive steps to protect yourself:
1. Review the denial letter carefully. Insurers must explain why they’re denying your claim. Compare the explanation to your actual policy. Look for vague language, unsupported accusations, or misinterpretations.
2. Request your claim file. You have the right to see the notes, reports, and communications that went into the decision. These records often reveal whether the insurer conducted a fair investigation.
3. Gather your evidence. Collect photos, receipts, repair estimates, and witness statements. Independent documentation is often the best way to counter an unfair denial.
4. File an internal appeal. Most insurers have an appeal process. Provide a clear, organized response with supporting evidence.
5. File a complaint with regulators. State insurance departments oversee insurers and can ensure they are complying with fair claims practices.
6. Consult an attorney. If your insurer continues to stonewall, a lawyer experienced in bad faith insurance cases can explain your legal options, negotiate on your behalf, and, if necessary, file suit.
How Do Courts Handle Disputed Claims?
When disputes reach the courtroom, judges often look closely at whether the insurer gave the policyholder a fair shake. In fact, many rulings stress that ambiguity in a policy must be interpreted in favor of the insured. This principle exists because insurance companies write contracts and control the language. Individuals have little, if any, bargaining power to write the terms to suit their personal needs.
In practice, this means that if your policy could reasonably be read two ways, courts generally will side with you.
Can Insurance Companies Retaliate if You Push Back?
Many people hesitate to challenge a denial. Insurance companies count on that. They fear retaliation, such as canceled policies or raised premiums. While insurers do have some discretion to adjust rates at renewal, they cannot legally retaliate against you for asserting your rights. Laws in most states prohibit unfair discrimination or cancellation in response to a claim dispute.
In fact, standing up for yourself and enforcing your rights often prompts insurers to take a serious second look at the incident. They know that regulatory complaints and bad-faith lawsuits can be costly and potentially hurt their image.
Fundamentally, you paid for insurance to protect you or your property from potentially expensive risks. If you feel your insurance company is treating you fairly, it’s important to talk to someone who can explain your rights and whether you are getting what you paid for.
Why Legal Help Matters for Insurance Disputes
Insurance disputes can be draining. Between confusing policy language, long delays, and intimidating letters, many policyholders give up. That’s exactly what some insurers count on. Having an attorney on your side levels the playing field.
A skilled insurance attorney can:
• Analyze your policy for hidden protections
• Identify bad faith tactics
• Handle negotiations with the insurer
• File lawsuits when necessary
• Pursue additional damages beyond your original claim
Most importantly, legal representation sends a clear message to the insurer: you’re serious about enforcing your rights.
The Right Attorney Can Help You Get the Compensation You Paid For
Insurance is supposed to provide peace of mind. After all, you paid your premiums for years, expecting your insurer to be there for you if disaster struck. But when companies deny valid claims, policyholders get left out in the cold.
The good news is that the law gives you tools to fight back. You can appeal within the company, file complaints with regulators, or pursue a bad-faith lawsuit in court.
If your insurer has denied or delayed a claim, you have options to protect your legal rights. We have years of experience protecting homeowners, small businesses, and injure people from bad faith insurers and getting them the compensation they deserve. Call our team at 303.592.5910 or contact us online today.
David Roth is a trial lawyer at Ogborn Mihm LLP who represents individuals and businesses in complex insurance disputes, including cases involving bad faith denials and delayed claims. He has successfully held insurers accountable when they put profits ahead of policyholders, helping clients recover the benefits they were promised as well as additional damages when warranted. David’s practice is grounded in advocating for fairness in the insurance process and ensuring his clients’ rights are protected.
