When you file an insurance claim, the insurer may pay, or it may deny the claim, and understanding the valid and invalid grounds for denial is important. Insurers commonly deny claims on grounds such as: concealment (the insured's failure to disclose a material fact they knew, which entitles the insurer to rescind); misrepresentation or false statement of a material fact in the application; breach of a material warranty or condition in the policy; the loss falling within an exclusion in the policy; non-payment of premium; or the claim being filed beyond the period allowed. Materiality is judged by whether the fact would have influenced the insurer in deciding whether to issue the policy or at what premium. However, the insured is not without protection. For life insurance, the incontestability clause provides that after a policy has been in force during the lifetime of the insured for a period of two years from its date of issue, the insurer can no longer contest the policy on grounds of concealment or misrepresentation (except for certain matters like non-payment of premium). Any ambiguity in an insurance contract, being a contract of adhesion, is construed against the insurer. If an insurer denies or delays a valid claim in bad faith, the insured may sue to recover the proceeds and may be entitled to interest, damages, and attorney's fees. The insured should demand the specific reason for denial in writing, review the policy, and gather proof of the loss and of timely notice. So a denied claim is not the end of the matter: the denial must rest on a valid ground, and wrongful denial can be challenged.
Common Grounds for Denial
- Concealment of a material fact the insured knew;
- Misrepresentation in the application;
- Breach of a warranty or condition, or a policy exclusion; and
- Non-payment of premium or a late claim.
The Insured's Protections
Materiality is judged by whether the fact would have influenced the insurer. For life insurance, the incontestability clause bars contesting for concealment/misrepresentation after two years in force. Ambiguities are construed against the insurer.
Remedies for Bad-Faith Denial
If an insurer denies or delays a valid claim in bad faith, the insured may sue to recover the proceeds plus interest, damages, and attorney's fees. Demand the reason in writing and gather proof of loss and notice.
Practical Takeaways
- Denial must rest on a valid ground (concealment, exclusion, etc.);
- The incontestability clause protects long-standing life policies;
- Bad-faith denial can be challenged for proceeds plus damages.
Frequently Asked Questions
On what grounds can an insurer deny a claim? Common grounds include concealment or misrepresentation of a material fact, breach of a warranty or condition, the loss falling within a policy exclusion, non-payment of premium, or a claim filed beyond the allowed period.
What is the incontestability clause? For life insurance, after a policy has been in force during the insured's lifetime for two years from issue, the insurer can no longer contest it on grounds of concealment or misrepresentation, except for certain matters like non-payment of premium.
What can I do if my valid claim is denied in bad faith? You may sue to recover the proceeds and may be entitled to interest, damages, and attorney's fees. Demand the specific reason for denial in writing and gather proof of the loss and of timely notice.
How is ambiguity in a policy interpreted? Against the insurer. An insurance contract is a contract of adhesion, so any ambiguity is construed in favor of the insured and against the insurer that drafted it.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.