Insurance Claims: Denial or Delay of Payment
Insurance companies routinely deny or delay payment of claims for benefits for medical bills, requests for approval for medical treatment, and other claims like hail damage, loss from fire, flooding, theft, property damage, and other covered losses. The insurance policy is the contract between the insurance company and the named insured, who becomes the "claimant" when a claim is submitted. The person is a "first- party claimant" when making a claim for benefits against their own insurance company (and a "third-party claimant" when seeking reimbursement from someone else and their insurance company), under an insurance policy for which premiums have been paid by the claimant, or someone on the claimant's behalf (such as an employer, parent, spouse, etc.). The insurance policy contains specific instructions for how a claim must be submitted, including when, where, and requirements (such as a referral from primary care provider/PCP to a specialist, referral by PCP or specialist for diagnostic testing, referral by PCP or specialist for physical therapy, etc.) before the claim will be considered for payment. These requirements most often must be strictly followed, or the claim for benefits will be delayed or denied. Colorado law at CRS 10-3-1104(1)(h)(XIV) requires an insurance company to “promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement” of a submitted claim by its insured.
Colorado law provides many protections for "first-party claimants" when making a claim for insurance benefits. However, the requirements in the insurance policy are contractual obligations that must be followed to make sure that the claim is properly submitted. Therefore, it is important to read the insurance policy and follow those requirements when submitting a claim. Often, claims are delayed, rejected or denied because these requirements are not followed. Typically, the insurance company sends a letter with an explanation of what needs to occur next, or why the claim was denied and the appeal process. These steps must be followed for the claim for benefits to be properly considered. Many people do not timely or properly follow-up, resulting in the claim for benefits being denied.
Colorado law at CRS 10-3-1115 and 1116 provide for contract damages for the claim benefit amount that has been unreasonably delayed or denied, and an additional 2 times the covered benefit that has been unreasonably delayed or denied, plus attorney fees and costs, in addition to other remedies available by Colorado statute or common-law (such as common-law insurance bad faith claims, punitive/exemplary damage claims, etc.). CRS 10-3-1116(3) requires that the first-party claimant "has exhausted his or her administrative remedies" under the insurance policy or contract before a lawsuit can be filed. This means that the claim for benefits must follow the directions in the insurance policy for submission of a claim, and requests for additional information from the insurance company require a timely response. In addition, any and all appeal requirements in the insurance policy or contract must also be complied with before a successful lawsuit can be pursued regarding any delayed, rejected or denied claim for benefits.
Very often, claims for benefits are unsuccessful because these steps required by the insurance policy or contract are not followed. The insurance company has a duty under Colorado law to assist its insured with all first-party claims for benefits. However, many claims are not paid because first-party claimants did not read or follow the requirements in their insurance policy contracts. This becomes a "numbers game" from which insurance companies greatly profit. Insurance policies and contracts can be very difficult to read. It is important to be persistent and timely respond to all communications from the insurance company on a claim. Most lawyers who handle insurance claims and lawsuits will provide assistance and review of insurance policies and contracts at an hourly rate based on the time expended. This can be a worthwhile investment if the claim or claims are significant.