What are the Different Types of Insurance Claims?

 

Insurance Lawyers for Policyholders and Accident Victims When the Insurance Company Denies Coverage or Disputes Claim Value

 

You are watching Netflix with your family when a tree crashes through the roof of your house, allowing rain to soak your furniture, rugs, and floors.

 

You need money to repair your home, so you call the insurance company that sold you a Homeowners Policy and promised financial protection from natural disasters. But instead of taking good care of you, the insurer takes weeks to investigate the damage and offers significantly less money than you need to pay for the repairs.

 

Or maybe you are driving down Interstate 95 when a drunk driver runs into you, causing an injury to your back and concussion.

 

The drunk driver’s auto liability insurance policy offers only $40,000 despite policy limits of $50,000. But your medical bills total $125,000 after needing spinal fusion, and you will likely miss six months of work if you can return at all.

 

Finally, after much back and forth, the other driver’s insurer offers the total policy limits. But the uncertainty and delay caused additional stress on you and your family, worsening your post-concussion syndrome.

 

After finalizing the car accident settlement with the other insurer, you call your auto insurance company. You knew this type of catastrophic event could happen and had purchased $250,000 of underinsured motorists’ coverage to protect you. But when you ask your insurer to cover additional damages, it says no. And it offers only $10,000 more.

 

Do these scenarios sound familiar?

 

Consumers like you and me buy insurance to protect our standard of living when we suffer injury, illness, and property damage and prevent financial ruin.

 

Sometimes the insurer steps in and does the right thing, helping us get back to normal or as close to it as possible.

 

But other times, the insurer delays, denies, and aggressively defends claims for losses even though the loss is the exact reason you or the negligent party bought the insurance policy. And unfortunately, this behavior is widespread amongst insurance companies.

 

This article discusses insurance claims when an insurer refuses to pay what it owes under a policy purchased to protect against the loss incurred. Specifically, it focuses on personal lines insurance, sometimes called property and casualty insurance for individuals.

 

Our injury law firm represents policyholders with claims against insurance companies. And we also get results for accident victims looking to recover through a negligent party’s insurance. Indeed, we sue insurers regularly to help our clients collect fair compensation for their losses and avoid financial catastrophe. We do not believe the insurance company should benefit from your desperation at a time when you are most vulnerable.

 

Keep reading to learn more about the many types of insurance claims.

 

And contact us for a free consultation if you need help with an insurance claim. See why other attorneys and accident victims have named me one of the state’s best workers comp and car accident lawyers.

 

 

Introduction to the Insurance Industry

 

Our jobs provide income to rent or purchase a home, buy a car, feed our family, furnish education to our children, get treatment for sickness and disease, and have a comfortable retirement. But insurance protects these things and abilities when an unexpected disaster occurs. 

 

Therefore, it is no surprise that insurance is big business. For example, in 2020, the United States insurance industry collected more than $1 trillion in private and casualty insurance, life/annuity insurance, and health insurance premiums. 

 

The ten largest property and casualty insurance carriers are:

 

• State Farm
• Berkshire Hathaway Inc. (including Geico)
• Progressive Corp.
• Allstate Corp.
• Liberty Mutual
• Travelers Companies Inc.
• USAA Insurance Group
• Chubb Ltd.
• Farmers Insurance Group of Companies
• Nationwide Mutual Group

 

And the ten biggest life and annuity insurers are:

 

• MetLife Inc.
• Equitable Holdings
• Prudential Financial Inc.
• New York Life Insurance Group
• Massachusetts Mutual Life Ins. Co.
• Principal Financial Group Inc.
• Lincoln National Corp.
• Western & Southern Financial Group
• Transamerica
• American International Group (AIG)

 

Chances are good you have heard of some, if not all, of these insurers because of their significant (and expensive) advertising campaigns. 

 

How Insurance Companies Make Money

 

Insurance companies must earn profits to stay in business.

 

Therefore, understanding how insurers make money can help you understand why disputes over insurance coverage or damages often arise.

 

You pay premiums when you buy an insurance policy.

 

Part of these premiums goes toward the insurance company’s overhead and expenses, such as office space and employee salaries. And part goes toward paying losses incurred by policyholders.

 

The remaining amount is profit for the insurer.

 

In addition to earning profits by collecting more in premiums than it pays on loss costs and overhead, insurers profit from investment income.

 

Investment income is the interest earned on premium dollars invested in stocks, bonds, real estate, and other financial instruments before using the collected premiums to cover losses. Typically, the longer you invest money, the more you earn in interest. Therefore, delaying loss payments helps insurers increase profits.

 

How Insurance is Supposed to Work

 

Under an insurance contract, the insurance company promises to pay or protect you when a specific incident occurs.

 

But an insurance policy is unique from other contracts for several reasons.

 

First, the insurer decides who the policy covers and how much to pay when a loss occurs. This relationship provides significant leverage to the insurer when negotiating the claim value.

 

Second, casualty insurance does not pay a set benefit amount. Instead, it is indemnity coverage. This means the insurer only pays enough to restore the policyholder to the same financial position after the loss as before, up to the policy limits. And disagreement over how much is needed to make the policyholder whole is common.

 

Insurance laws require insurers to act as their policyholders’ fiduciaries to counteract this leverage. This means the insurance company must treat you fairly and act in good faith when adjusting your claim for damages.

 

Unfortunately, insurers don’t always act reasonably or in good faith when their policyholders (or, in some cases, third parties) submit claims. And litigation may be necessary to fix this.

 

Insurance Categories

 

Insurance is often categorized by line or by interests protected.

 

Lines of Insurance

 

When analyzing disputes, industry professionals and attorneys further divide insurance policies into personal and property and casualty insurance.

 

For example, personal insurance lines include life, accidental death or dismemberment, disability, and health insurance. And property and casualty lines include ocean and inland marine, fire, title, errors and omissions, and some types of liability insurance.

 

Interests Protected by Insurance

 

The law also distinguishes first-party and third-party insurance.

 

First-party insurance is a policy purchased to insure yourself or your property.

 

With first-party insurance, you submit a claim for payment or reimbursement to your insurer when you suffer a loss. And the insurance company must treat you in good faith when evaluating your claim.

 

If the insurer fails to treat you in good faith, you may file a lawsuit against the insurance company for breach of contract and bad faith. This type of lawsuit allows you to seek damages beyond the benefits offered by the insurance contract.

 

By contrast, third-party insurance pays proceeds to a third party when you (the insured) are liable for damages.

 

Types of Insurance Policies that May Lead to Legal Disputes

 

Let us take a closer look at insurance contracts that are often central to coverage disputes or litigation over the claim’s fair value.

 

Accident Insurance

 

You may have seen Aflac commercials starring a duck. If so, you have watched an advertisement for accident insurance.

 

Accident insurance pays a set benefit amount for specific injuries or dismemberment. The amount depends on the body part injured or amputated.

 

You can spend the payment however you choose.

 

Accident insurance does not replace health insurance or income-replacement options. Instead, it supplements them.

 

Adults may also purchase this type of insurance for children. For example, if your child sustains a broken bone when playing soccer, you can receive payment under accident insurance.

 

Business Interruption Insurance

 

This insurance contract protects a business from loss of income and profits due to a disaster such as fire.

 

However, courts have seen many claims for coverage under business interruption insurance policies due to mandated shutdowns during the COVID-19 pandemic.

 

Cyber Insurance (also Called E-Commerce Insurance)

 

It seems like the media reports on a cyber-attack daily.

 

Understanding that cyber-attacks can cause real damage, some people and companies purchase cyber insurance.

 

Cyber insurance covers losses from damage to information technology (IT) systems and networks, data destruction, and liability from claims for failure to safeguard private data from breaches.

 

Sometimes these damages result from hackers. But other times they result from the physical destruction of computer systems or loss of access to the network.

 

Health Insurance

 

Health insurance (or medical insurance) covers some or all health care expenses. Specifically, health insurance is coverage that provides for the payments of benefits due to sickness, injury, or to prevent these conditions. This includes hospital stays, doctor visits, surgeries, vaccinations, prescription medication, and medical imaging costs. 

 

There are many health insurance programs. Some are private-funded, while the government (taxpayer-funded) pays for others. 

 

Public (government) health care programs include:

 

• Medicare
• Medicare Advantage
• Medicare Part D
• Medicaid
• Military health care through the Department of Defense, Veterans Affairs (Veterans Health Administration), or Tricare
• Children’s Health Insurance Program (CHIP)
• Indian Health Service

 

Private health insurance may be purchased by a group (a company buys insurance to cover its employees) or individual consumers. 

 

The largest health insurance companies in the United States are:

 

• UnitedHealth Group
• Anthem
• Centene
• Humana
• HCSC
• CVS Health
• Molina Healthcare
• Cigna
• Kaiser Permanente
• Guidewell
• Aetna

 

And each of these health insurance companies offers many types of plans with varying deductibles, premiums, and in-network provider requirements. 

 

Disputes with health insurers arise when they deny treatment recommended by a treating physician or surgeon, refuse to pay what is owed by contract, or exercise subrogation rights against proceeds (verdict or settlement) from a personal injury or workers comp case.

 

Income Protection Insurance

 

Several kinds of insurance may protect your income from loss due to disability or injury. 

 

These insurance coverages include:

 

• Short-term disability insurance:  This insurance replaces part or all of your income if you have a temporary disability. Usually, you cannot receive these insurance payments for more than six months. 

 

• Long-term disability insurance: This insurance replaces part or all of your income if you are permanently and totally disabled. Your employer may provide long-term disability insurance, in which ERISA (a federal law) governs the policy. Or you may purchase a private long-term disability policy. Many long-term disability policies require you to apply for Social Security disability because the long-term insurer can reduce the payments it makes based on receipt of SSDI benefits. 

 

• Workers compensation: You may receive workers comp benefits such as lifetime medical coverage, payment for permanent loss of use or scarring/disfigurement, or wage loss replacement if you sustain an occupational injury or disease. In addition, your employer or its workers comp insurer may offer a settlement to resolve your case.  

 

• Social Security disability: You may qualify for Social Security Disability Insurance (SSDI) benefits if you cannot perform any substantial gainful activity (SGA) due to a severe medical impairment lasting twelve months or more. Typically, it becomes easier to get approved for SSDI when you turn 50. This is because the Social Security regulations lessen the disability requirements when you turn 50, then 55, and then 60. 

 

• Business overhead insurance for disability: This insurance coverage, also called Business Expense Insurance, pays the insured’s business overhead if they become disabled. Usually, the monthly benefit depends on actual business expenses, not expected profits. And it is only available for small businesses dependent on one or two people for revenue. 

 

The most common disputes in these types of insurance claims deal with coverage (whether the statute or insurance contract covers your accident, injury, or disability) and whether you meet the definition of disability.

 

Liability Insurance

 

Tort and negligence law principles shift losses from injury victims to the persons or companies that cause them. Therefore, if you are legally responsible for an accident, you must pay for damages arising from that event.

 

Liability insurance protects you from this risk – financial ruin because you made a mistake that harmed someone else. It does this by (a) paying for damages you are held liable for and (b) providing legal defense if the plaintiff files a lawsuit.

 

Typically, liability policies cover your negligent acts, not willful or intentional actions.

 

Similarly, liability insurance helps protect accident victims from financial disaster after an accident they did not cause. Indeed, my firm often helps accident victims recover damages from the negligent person’s liability insurance.

 

Let us look at some of the types of liability insurance.

 

Auto Liability Insurance

 

Many states require anyone who drives or owns a vehicle to carry liability insurance. However, Virginia is not one of these states, though it requires uninsured drivers to pay a fee.

 

If another driver causes an accident and bodily injury, you have a claim against their liability insurance for personal injury damages.

 

Commercial General Liability Insurance

 

A general commercial liability (CGL) policy protects business owners from loss if they are found liable for bodily injury or property damage to others. Typically, it covers injuries resulting from claims for product liability (damages for a user harmed by any product manufactured or sold by the insured), premises liability, tort liability, and some types of contractual liability.

 

For example, suppose you tore your meniscus in a slip and fall accident while getting groceries at Food Lion. Depending on the facts, Food Lion’s CGL insurance may pay to settle the claim.

 

Directors and Officers’ Liability Insurance

 

This insurance coverage protects corporate directors and officers from judgments, settlement, and civil and criminal fines arising from shareholder actions, negligence lawsuits, and other business-related actions.

 

Employer’s Liability Insurance

 

Workers comp covers the majority of occupational injury and disease claims but not all.

 

Therefore, employers can purchase employer’s liability insurance for protection from claims by an employer outside the workers compensation system.

 

Employment Practices Liability Insurance

 

Employment practices liability insurance provides coverage for employment and labor law claims alleging discrimination, defamation, negligent hiring, negligent retention, or sexual harassment.

 

Environmental Liability Insurance

 

This coverage pays for bodily injury, property damage, and cleanup costs from pollution.

 

Professional Liability Insurance (Including Malpractice and Errors and Omissions (E&O) Insurance)

 

Professional liability insurance, also called malpractice or errors and omissions insurance, covers claims for losses arising from mistakes or negligence when providing services.

 

This insurance comes into play in claims for legal malpractice, medical malpractice, and architect or engineer negligence causing construction accident injuries.

 

Life Insurance

 

We get life insurance to replace our income when others depend on us.

 

A life insurance policy is a contract between the insurer and the policyholder where the insurer promises to pay a designated beneficiary a lump sum when the insured person dies. Usually, the policyholder is the insured person. But not always.

 

The life insurance policy may also provide burial and funeral expenses to the designated beneficiary (often the insured’s family).

 

Some employers offer group life insurance as an employment benefit. Group life insurance is term life insurance sold through contracts with employers. Usually, employers market it as a benefit when recruiting or retaining employees. But you may also buy a private life insurance policy.

 

There are two types of individual life insurance in the United States: term life insurance and savings-linked life insurance.

 

Term Life Insurance

 

Term life insurance promises to pay a specified death benefit if the insured dies within a specific period, so long as the person continues to pay premiums. Usually, the lengths are one, five, 10, 15, 20, 25, or 30 years.

 

The policyholder can renew the life insurance policy, convert it to permanent coverage, or let it expire when the term ends.

 

Savings-Linked Life Insurance (Whole Life)

 

Savings-linked life insurance policies include insurance and savings elements.

 

For example, you pay premiums for life with whole life (permanent) insurance. But the premiums exceed what is needed to pay the term life insurance benefit later, so the policy builds up a reserve or surplus. Then, you can cancel the policy later in life and collect the reserve. This amount is called the policy’s “surrender value.”

 

Property Insurance

 

Property insurance is the oldest type of commercial insurance.

 

It protects against risks to property and often includes a liability insurance element.

 

Let us look at common types of property insurance.

 

Aviation Insurance

 

This insurance protects aircraft (including drones, helicopters, and airplane hangars) and related liability risks to passengers, third parties, and the public.

 

Typically, aviation insurance policies provide coverage for:

 

• Ground risk hull insurance in motion: This coverage pays for losses incurred when the aircraft moves but is not in flight.

 

• Ground risk hull insurance when not in motion: This coverage pays for damage to the aircraft when it is still. For example, natural disasters such as lightning or floods may harm the plane.

 

• Passenger liability: Commercial aircraft usually carries passenger liability insurance to cover injuries or property damage suffered by persons on board.

 

• Public liability: This includes anything that the aircraft can damage, such as airport facilities, ground support equipment, or even homes.

 

Boiler Insurance

 

This insurance, also called machinery or equipment breakdown insurance, insures against physical damage to boilers and other named machines (plumbing, electrical, and central heating systems, etc.).

 

Builder’s Risk Insurance (Contractors’ All Risks (CAR) Insurance)

 

This property insurance indemnifies against damage to buildings under construction and the materials, fixtures, and equipment used on the job site.

 

Bumbershoot (Marine Umbrella) Insurance

 

This type of insurance provides excess liability coverage to businesses in the maritime industry such as:

 

• Boat dealers
• Boat operators
• Marina operators
• Marine terminal operators
• Port authorities
• Stevedores
• Watercraft manufacturers

 

Contents Insurance

 

Contents insurance is personal property insurance that pays for damage to or loss of your possessions (bikes, laptops, televisions, electronics, etc.). Usually, homeowners’ or renters’ insurance includes contents insurance. But you can purchase this type of property insurance on its own.

 

Crop Insurance

 

Farmers may purchase crop insurance to protect against harvest loss or damage from weather, drought, frost, pests, or disease.

 

Earthquake Insurance

 

Most homeowners’ insurance policies do not protect against damage from an earthquake. Therefore, some persons and businesses purchase earthquake insurance to supplement other policies.

 

Fidelity Bond

 

This insurance covers policyholders for losses or damage resulting from its employees’ dishonest acts (fraud).

 

Fire Insurance

 

As the name suggests, fire insurance protects you from loss of or damage to property from fire. Usually, fire damage or destruction coverage is part of the homeowner’s policy.

 

Flood Insurance

 

Flood insurance protects against property loss due to flooding since many home insurance policies do not cover this risk when it results from a hurricane.

 

Some property owners with flood insurance purchase it through the National Flood Insurance Program.

 

Guaranteed Asset Protection (GAP) Insurance

 

GAP insurance covers the difference between what an asset is worth and the amount you owe on the asset.

 

For example, suppose you take out a $30,000 loan on a new car.

 

A few weeks later, you wreck the car, totaling it.

 

The collision offers $20,000 to replace the car. But you still owe $28,000.

 

GAP insurance covers the difference.

 

Homeowners Insurance

 

Homeowner’s insurance protects the insured from damage to their residence from fire, severe weather, vandalism, or plumbing leaks and liability claims made by persons injured on the property.

 

A typical homeowner’s policy also includes theft coverage and reimburses the insured for living elsewhere when the home is being repaired or rebuilt.

 

The majority of homeowners have some form of homeowner’s insurance. Indeed, many mortgage lenders require this type of insurance before financing a home purchase.

 

Inland Marine Insurance

 

Inland marine insurance covers loss to shipping companies and people shipping goods, products, materials, and equipment by land (rail or truck) or canal.

 

This insurance also covers damage to property such as construction equipment, wind turbines, and medical diagnostic equipment when temporarily placed in a warehouse during transport by a third party.

 

Landlords’ Insurance

 

This insurance policy protects a property owner from losses connected with rental properties.

 

Often, landlords’ insurance covers the rental property and the contents belonging to the landlord inside.

 

Ocean Marine Insurance

 

Marine insurance covers damage to vessels at sea or on inland waterways and their cargo.

 

Renter’s Insurance

 

Renter’s insurance covers an insured’s personal property in the physical dwelling (apartment, home, condo, etc.) leased from another.

 

For example, you can use this policy to pay for the loss of clothes, furniture, electronics, or jewelry.

 

Further, renter’s insurance covers liability to persons injured on the leased premises.

 

Terrorism Insurance

 

This insurance indemnifies against losses from an act of terrorism.

 

Vehicle Collision Insurance

 

Collision insurance helps pay to repair or replace your vehicle if it sustains damage in a rollover accident or collision. You may use this insurance regardless of fault.

 

Collision insurance is available for ATVs, boats, cars, trucks, golf carts, motorcycles, bicycles, and other recreational vehicles.

 

Title Insurance

 

Title insurance protects property buyers and lenders from losses and damages from defects the title search company failed to identify before the transfer of ownership.

 

For example, a property title may be defective because of unidentified tax liens, property restrictions, back taxes, or will contests.

 

Virginia Lawyers Protecting Insurance Policyholders

 

The insurance industry is heavily regulated. But that does not stop some insurance companies from failing to treat policyholders fairly and in good faith. 

 

If the insurer refuses to pay your claim or offers only part of what you need to be made whole without adequate explanation, contact us to see how we can help.