How to Recognize Post-Claim Underwriting

Post insurance underwriting occurs when an insurance company refuses to pay your claim for a loss that should have been covered on the grounds that you were a bad risk and the policy should never have been issued, then cancels or rescinds the policy.

When you apply for insurance, your application is underwritten by the insurance company. Underwriting is the practice of determining, based on your application and other information the underwriter may obtain regarding your health and background, whether the insurance company should make you an offer of insurance and, if so, on what terms and for what premium. All of this underwriting work is normally completed before your insurance policy is issued. Post claim underwriting is a practice whereby an insurance company, which has reason to know or suspect adverse prior medical history for you, waits until you file a claim before spending money to confirm its suspicion and then asserts that no coverage exists; therefore no claim can be paid.

An insurance company that is relying on post claim underwriting, instead of looking to pay your submitted claim for a loss incurred by you as promised under the terms of the insurance policy it issued to you, looks for all the things in your application or coming from your application that it might be able to dig up to rescind (cancel) your policy and avoid having to pay your claim. The insurance company, rather than refusing to issue you a policy at the time you apply because information in the application leads it to believe you are a bad risk, waits until after the policy has been issued (and you are falsely secure in the knowledge that you have insurance protection) and, then after you have submitted a claim, denies coverage on the grounds that the policy should not have been issued in the first place.

When this occurs, the insurance company ignores its commonly understood obligation to do underwriting when a policy application is made rather conducting its risk assessment after your claim is submitted. The insurance company performs this after-the-fact evaluation to rid itself of an insured individual it contends should never have received insurance coverage. Meanwhile, you believe that you have valid insurance and do not seek insurance elsewhere.

The typical post claim underwriting case is easy to recognize. Instead of being processed through the claims department, your claim is sent to the insurance company’s underwriting department. The underwriting department then begins its post claim underwriting by requesting you to sign a release for your medical records. Alternatively, it may forward a release obtained at the time of your application to your medical service providers. After the underwriting department carefully reviews your medical records, and identifies an omission or inconsistency from what was shown on your original application, the insurance company denies coverage on the basis of misrepresentation, concealment or fraud in your application. You are advised that your policy is being rescinded, the premiums returned, and that there is no coverage for the claimed loss.

A very simplified insurance application provides another hint that the insurance company may engage in the practice of post claim underwriting. The insurance company may ask only whether you are in “good health” or may even make no health inquiries at all. If health-related questions are included, they are generally broad-based and subject to interpretation, opinion-type questions, and ask you to check a “yes” or “no” box, without requiring any explanation. Although the form may request the names of treating physicians, the insurance company that engages in post claim underwriting will not follow-up on the information provided until after you file a claim. The policy is issued immediately upon your application and payment of premium. No medical examination is requested.

Often a long delay occurs between the time you file your claim and its final disposition while the insurance company performs underwriting. The company prepares this file as thoroughly and completely as it can to support its plan to rescind, or cancel, your policy on the grounds that it has, after the fact, unearthed information about your prior medical history that would have caused it to decline your application for insurance if this information were known at the time of application. The acquisition of medical records and their assessment can take months.

If you believe you are about to be the victim of post claim underwriting, you should immediately consult an attorney with expertise in this area to protect your rights.