Having insurance should provide us peace of mind; we know that, should an accident or debilitating illness occur, our losses will be covered. In exchange for this assurance, we pay a premium for business, auto, health, disability —though all the while hoping we’ll never have to make a claim.
Unfortunately, sometimes when we do need to use our insurance, the insurance company refuses to pay out the coverage we have purchased. One of the ways insurers do this is through “post-claim underwriting,” which is when an insurance company issues a policy with little or no investigation into the insured’s relevant background, waits until a claim is filed to gather this information, and then denies coverage based on what they found.
The good news is that you may have recourse if this happens to you, so let’s look more closely at what post-claim underwriting entails.
In Colorado, insurance companies are obligated to act in good faith. That means that they must promptly investigate and pay a claim, regularly communicate with the insured, and offer a reasonable explanation regarding any claim denial or settlement offer.
Despite this statutory obligation, sometimes insurance companies are reluctant to pay claims, and, instead, they engage in post-claim underwriting to attempt to avoid payouts.
Before issuing policies, insurance companies are supposed to weigh or “underwrite” the risk involved. With health insurance policies, for instance, this process would involve gathering information about the applicant’s medical history. Some insurers prefer to skip this vetting, however, because of the expense involved; instead, they do the underwriting after a claim is filed.
While this practice may save insurance companies money, you can see how it can be terribly unfair to individuals and businesses who believed they had insurance—and, in fact, have paid for coverage—only to have their claims denied. This is even more troublesome when you take into account that these same individuals may have been able to secure coverage from an insurance company who did proper underwriting from the start.
Are You in a Post-Claim Underwriting Situation?
If you have been denied coverage or had your coverage rescinded or cancelled, and you think your insurance company might be engaging in post-claim underwriting, you should get in touch with an experienced insurance law attorney immediately.