Denial of Coverage vs. Denial of Liability

by: Everett Lupton

Sometimes as a personal injury lawyer I hear from a new client, “the insurance company has denied my claim!”  When an insurer denies a claim, it can have alternative meanings. Most denials that I see are of two types: a denial of coverage and a denial of liability. In this blog, I will distinguish between these two types of denials and discuss what each means for an injured person and what can be done about them.

Denial of Coverage

Sometimes an insurance company will issue a denial of coverage. The denial is supposed to be based on certain facts under which a condition precedent to an acceptance of coverage or a condition subsequent to a denial of coverage exists. Insurance coverage is determined by contract and, to a certain extent, is determined by statues and regulations.  An insurance policy is a contract between the Insurer (insurance company) and the Insured (policy holder). In many cases, there is also coverage to a third-party beneficiary of the policy (for example, a permissive driver of an insured vehicle) in which case coverage is provided to the third party by the Insurer as if the third party was a named insured. When an insurer denies coverage, the insurer may raise any number of reasons including 1. that the policy is void due to misrepresentations by the insured, or 2. that the nature of the claim is not covered by the policy. In Virginia and North Carolina, most insurance companies must have their form policies, including endorsements and addenda submitted and approved by the state insurance regulatory body. In Virginia, the State Corporation Commission’s Bureau of Insurance regulates insurance companies doing business (i.e., underwriting policies) in Virginia. In North Carolina, the Department of Insurance regulates insurance companies.

Denial of Liability

When an insurer denies liability, what the insurer is usually claiming that 1. the insured is not a fault for the crash/accident/incident and/or 2. the injured person is partly or wholly responsible for causing the crash/accident/incident. When asserting only a denial of liability, there is usually not an issue of whether there is insurance coverage for the injury, but rather the insurer is claiming that there is no fault committed by the insured such that the insurer would be obligated to pay the claim. The issue is that the insurer is taking a position that under the state law of either Virginia or North Carolina a finder of fact (jury or judge) will not find their insured is liable to the injured person and therefore the insurer will not voluntarily offer a settlement amount. In a denial of liability situation, usually the only way to make the insurer pay is to file suit against the insured tortfeasor. During the litigation process, if there are additional facts “discovered”, the insurer may, and often does, reevaluate the denial of liability and offer to settle the claim. Sometimes, however, the insurer maintains the denial through the litigation process. In these situations, the only remedy is to proceed to trial and obtain a judgment against the insured.  Upon the entry by the court of a final judgment order, the insurance company is then legally obligated to pay the amount of the judgment. Sometimes an insurance company will pay the amount of the verdict/judgment, but sometimes the insurance company will appeal, or threaten to appeal the judgment. Ultimately, the insurance company may pay additional court costs to the prevailing injured person and pay incidental expenses, most of these “extra” expenses probably could have been avoided if the insurance company had offered a fair settlement much earlier in the process.

Because of these denial issues, it is important that an injured person promptly seek legal representation from a law firm with knowledge and experience in handling injury claims.

Don’t Face Them Alone

If your injury claim has been denied, don’t face the insurance company alone.

Slaughter & Lupton Law has decades of experience standing up to insurers in Virginia and North Carolina. We’ll review your case, explain your options clearly, and fight for the compensation you deserve.

Request your free case review today.

Everett Lupton is a partner and practicing attorney at Slaughter & Lupton Law, PLLC. His expertise ranges from motor vehicle accidents, serious slip and falls, to wrongful death cases over decades practicing in Virginia and North Carolina. Learn more about Everett on his Attorney Profile.