Insurer’s Duty to Fully Investigate an Insured’s Claim

An insurance company has a duty to fully investigate an insured's claim for benefits before denying it. A thorough investigation and fair evaluation of an insured's claim requires an insurance company to examine the insured's proof of loss statement and supporting documents. Further, the insurance company cannot ignore evidence that is available to it which supports the claim. That is, the insurance company cannot focus only on the facts that would justify its denial of the claim.

If an insurance company's claim representative denied an insured's disability claim based solely on the representative's interpretation of the insured's medical records, the insured could allege that the company failed to perform a full investigation. The insured could argue that a thorough investigation required an independent medical evaluation or a review of the insured's medical records by a doctor.

While an insurance company does not have to accept the opinion of an insured's expert, it must take action if it questions the basis of the insured's claim. The insurance company is within its rights to investigate the basis of the expert's opinion. The company could ask the expert to explain his or her findings. It could also have another expert review the supporting documentation and give an opinion on the insured's claim. What the insurance company cannot do is ignore the expert opinion offered by the insured and deny the claim without trying to investigate it.

If the insurance company denies a claim because a genuine dispute exists regarding the coverage or the amount of the insured's claim, the insurance company may not be liable for bad faith. The genuine dispute rule applies only when the insurance company's position on a claim is maintained in good faith and on reasonable grounds. When an insured makes an insurance claim, it is very important to give the insurance company all of the facts supporting the claim as soon as possible. The insured should keep copies of all the documents that the insured gave to the insurance company. If the insurance company denies the claim, the insured's counsel should consider whether the insurance company fully considered all the facts surrounding the claim before denying it.