Yes, an insurance company can refuse to pay a claim, and they do it often. In 2023, insurers denied roughly 20 percent of in-network claims filed through HealthCare.gov plans, with some carriers denying more than half.1KFF. Claims Denials and Appeals in ACA Marketplace Plans in 2023 Some of those denials are legally airtight. Others are wrong, and a surprising number get reversed when policyholders push back. What matters is knowing which category your denial falls into.
Legitimate Reasons an Insurer Can Deny
Four reasons account for most denials that hold up in court. If your denial fits one of these, the insurer is standing on solid ground unless you can undercut the facts behind it.
Your Loss Falls Within a Policy Exclusion
Every policy lists situations it does not cover. Homeowners insurance almost always excludes flood and earthquake damage. Standard auto policies exclude damage from racing. Life insurance policies routinely exclude suicide within the first two years. If your loss lands inside an exclusion, the insurer has a contractual right to deny.
Clarity is the pressure point. Courts apply a doctrine called reasonable expectations: when policy language is ambiguous, the ambiguity gets resolved in your favor, not the insurer’s, because the insurer wrote the contract and you had little ability to negotiate its terms. If an exclusion is buried in dense language or could reasonably be read two ways, you have grounds to challenge a denial based on it.
Watch for anti-concurrent causation clauses in property policies. These say that if an excluded peril and a covered peril combine to cause your loss, the entire claim is denied, even if the covered peril was the primary cause. A hurricane that produces both flood (excluded) and wind damage (covered) can trigger a full denial under one of these clauses.
You Misrepresented Something on Your Application
The answers you gave when you applied for coverage affect whether the insurer agreed to insure you and at what price. If those answers were false in a way that mattered, the insurer can deny a later claim or void the policy entirely, sometimes after years of accepting premiums.
The standard is material misrepresentation. The insurer generally must show the false information was significant enough to have changed its underwriting decision and that it actually relied on that information when issuing the policy.2NAIC. Material Misrepresentations in Insurance Litigation In most states, the misrepresentation doesn’t have to relate to the specific loss. Understating your home’s fire risk can defeat a later theft claim.
The most severe outcome is rescission: the insurer treats the policy as if it never existed and refunds your premiums. Some states allow rescission for any material misrepresentation, even an honest mistake. Others require proof you intended to deceive. Insurers must act reasonably quickly once they discover the false information; they cannot sit on it and use it only after a claim comes in.
Your Policy Lapsed for Nonpayment
Stop paying premiums and coverage eventually ends. Claims filed after that point get denied. This is the most preventable reason for a denial and it catches more people than you would expect.
Most policies include a grace period after a missed payment. Life insurance typically provides 30 or 31 days. Auto grace periods tend to be shorter, often 10 to 20 days. Health coverage through ACA marketplace plans gives you up to three months if you receive a premium tax credit, and generally 30 or 31 days if you don’t.3Beyond the Basics. Premium Payments and Grace Periods Some policies have no grace period at all.
States generally require insurers to send written notice before canceling for nonpayment, commonly 10 to 30 days in advance. If the insurer cancels without proper notice, the cancellation itself may be invalid, and claims filed during that gap could still be covered. The burden is on the insurer to prove it sent the notice.
Reinstatement is harder than just catching up on payments. Insurers often require a new application and fresh risk assessment, and may charge more based on the gap. If your circumstances changed during the lapse, you may not qualify at all.
You Reported Late or Failed to Cooperate
Policies require you to report losses promptly and to cooperate with the investigation. Missing either duty gives the insurer grounds to deny.
Prompt notice clauses obligate you to notify the insurer as soon as reasonably possible. Claims-made professional liability policies go further and require the claim itself to be made and reported during the policy period. Missing that window can be fatal regardless of the merits. In occurrence-based policies like most homeowners and auto policies, late notice is less likely to trigger an outright denial, but insurers can still argue the delay prejudiced their investigation.
Once you file, the insurer will want to inspect damage, review documents, and possibly take a recorded statement or examination under oath. Refuse and the insurer may deny for non-cooperation. Courts don’t let insurers use this casually; most jurisdictions require the insurer to show it was actually prejudiced, meaning the information was irreplaceable rather than just inconvenient to get another way. Still, stonewalling hands them the excuse. Cooperate fully from the start.
When the Denial Itself Is the Problem
Sometimes the issue isn’t your policy. It’s the insurer’s conduct. Bad faith occurs when an insurer unreasonably refuses to honor a valid claim, drags out the process hoping you give up, or runs a sham investigation designed to justify a predetermined denial. Every state recognizes this as a legal claim.
The NAIC’s Unfair Claims Settlement Practices model regulation, adopted in some form by most states, sets baseline conduct standards. Insurers must acknowledge claims within 15 days of notice, accept or deny within 21 days of receiving proof of loss, and cite the specific policy provision behind any denial. They cannot misrepresent policy provisions, deny on a technicality without documenting a genuine breach, or mark partial settlement checks as “final” unless the policy limit has been paid or both sides agreed to a compromise.4NAIC. Unfair Property/Casualty Claims Settlement Practices Model Regulation
The financial exposure for bad faith is significant. A policyholder who proves it can typically recover the full amount owed, consequential damages such as lost profits from the delay, attorney’s fees, and in many states punitive damages. Liability isn’t capped at the policy limit. Some states also allow recovery for emotional distress caused by the insurer’s conduct.
If you suspect bad faith, document everything. Save every letter, email, and voicemail. Log every phone call with the date, the representative’s name, and what was said. That paper trail becomes your evidence.
What to Do After a Denial
A denial letter is not the end. Most denials can be challenged, and many are overturned when the policyholder responds with specifics.
Get the Denial in Writing
If the insurer denied verbally, request a written denial citing the specific policy provision, condition, or exclusion behind the decision. Insurers are required to provide that reference.4NAIC. Unfair Property/Casualty Claims Settlement Practices Model Regulation Then pull out your actual policy and read the cited provision in context. Insurers sometimes misapply exclusions, overlook endorsements that modify standard terms, or cite provisions that don’t actually support the denial.
File an Internal Appeal
Most insurers have a formal internal appeal process. For health insurance, federal law gives you 180 days from the date you learn of the denial to file an internal appeal.5HealthCare.gov. Internal Appeals Submit any supporting documentation the insurer didn’t already have: a letter from your doctor, a contractor’s estimate, photographs, a second opinion on the cause of damage. Keep originals and send copies.6NAIC. How to Appeal Denied Claims For property and casualty claims, appeal deadlines vary by policy and state, so check your policy’s claims provisions.
Request an External Review
For health insurance denials involving medical judgment or experimental treatment decisions, you have the right to an external review by an independent third party after your internal appeal is exhausted. Every state must offer a process meeting federal consumer protection standards. You have four months from the final internal appeal decision to file. Standard reviews are decided within 45 days; urgent medical cases get an expedited review within 72 hours.7HealthCare.gov. External Review External review is also available when an insurer tries to cancel your health coverage based on alleged application misrepresentation.
File a Complaint with Your State Insurance Department
Every state regulates insurer conduct through a department of insurance. Filing a complaint won’t directly reverse your denial, but it triggers a regulatory inquiry. The department can require the insurer to explain and justify its decision, and can impose fines or sanctions if it finds a pattern of unfair practices. Sometimes the involvement of a regulator alone is enough to get an insurer to reconsider.
When to Bring in Professional Help
Not every denied claim needs a lawyer. The question is which kind of professional fits your situation.
A public adjuster is a licensed specialist who assesses property damage, interprets your policy, and negotiates with the insurer on your behalf. They handle the documentation-heavy side of the claims process. Public adjusters work on a percentage of the settlement, with fee caps that vary by state. They make sense for a straightforward property claim where the issue is documenting and valuing the loss, not fighting over whether coverage exists.
An insurance attorney handles what a public adjuster cannot. Attorneys advise on bad faith, interpret complex policy language, and file a lawsuit if it comes to that. If your claim involves a coverage dispute, a large or complex loss, potential bad faith, or multiple parties, an attorney is the right call. Many insurance attorneys work on contingency, collecting a fee only if you recover money.
One situation should send you straight to an attorney: the insurer rescinds your policy after years of accepting premiums rather than just denying a single claim. Rescission wipes out coverage retroactively, and the stakes justify professional representation immediately.
The Deadline That Ends Your Options
If negotiation and appeals fail and you decide to sue, you face a deadline. The statute of limitations for breach of an insurance contract varies by state, generally four to ten years from the date of the denial. Some policies contain a contractual limitations clause that shortens this window, sometimes to as little as one or two years. Miss the deadline and your lawsuit is barred no matter how strong the underlying claim. Check both your state’s statute of limitations for written contracts and your policy’s own limitations provision, and use whichever is shorter.