A Video Explaining When and How to Advise an Insured a Claim is Denied Unlisted Video

The Denial Must Be in Writing Setting Out All Reasons for the DenialShow more

Once a claim is denied, the insured no longer need comply with the conditions of the policy.  He or she need not submit a sworn proof of loss nor respond to requests for records or an examination under oath.  Therefore, an insurer should not make the decision to deny a claim until it is convinced that it has completed a thorough investigation.

If the investigation reasonably justifies a denial of the claim, the insured should always be notified in writing.

After the investigator is convinced that the investigation is complete and the file is properly documented, all the information must be gathered and evaluated in an objective and impartial manner. A fair and thorough analysis will negate charges of bad faith or malice to the insured. All information that can be corroborated must be corroborated by the fraud investigator.

Advice of counsel is not an absolute defense to a bad faith action. It is often no defense at all. Sometimes, if the insurer refuses to give the lawyer all of the information, it is evidence of bad faith.  Most courts agree that the advice of counsel is only evidence to be considered in determining whether the insurer denied a claim in bad faith.

On the other hand, denial can be enforced if the insured – even on the advice of counsel – refuses to fulfill a required condition of the policy. Therefore, the insured’s purported reliance on the alleged advice of counsel in refusing to answer an insurer’s questions and failing to supply requested documentation did not excuse her failure to comply with the policy conditions requiring her to supply the requested documents and answer material questions at her EUO. The insurer properly denied coverage on the basis that the insured’s failure to comply constituted material breaches of her contractual duties.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/