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Understanding refusal to defend

On Behalf of | May 11, 2023 | Insurance Disputes

When a person purchases property insurance, they usually believe they are fully covered for unexpected events and losses. However, sometimes insurance companies refuse to defend an insured person, which can lead to financial losses and other significant consequences.

Refusal to defend

When the insurance company either denies coverage or refuses to defend the policyholder, it means that it is not willing to pay for the costs of the policyholder’s defense.

It may state that there are policy limits, exclusions or that the insured has not met the policy’s conditions. As a result, the insured person may have to pay the costs of defending themselves against any claims.

Common denials

Many insurance policies have exclusions that state certain types of losses or events that are not covered. If a property owner has a policy that excludes payment for damage caused by earthquakes, natural disasters or flooding, for example, the insurance company may refuse to defend.

The insurance company may also state that the policyholder has exceeded the policy limits for coverage. If the cost of defending an insurance claim is more than the policy limit, it may also refuse to defend. It may also dispute the extent of the damage to the property and the costs to repair it.

The insurance policy may also have conditions, meaning that there are certain requirements the policyholder has to meet for the incident to be covered. For example, the policy may require a property owner to report an incident within a certain period of time. If the person does not, the insurance company may deny coverage.

Property owners have options available to them to seek payment.