As an insurance carrier, you have an obligation to pay out benefits for legitimate claims. As you know, however, not all claims are legitimate. If you need to deny a claim, you want to be sure that you're doing so correctly.
As a carrier, the best thing you can do is collect evidence on why you're denying the claim. Having plenty of evidence will help prevent a bad-faith insurance claim, even if it's not deserved.
What kind of evidence helps prevent lawsuits after denying a claim?
One thing you'll need to note clearly is the reason for the denial. Some common reasons include not filing a claim within a specified time frame, not having evidence to prove that the accident or injury actually occurred and filing a claim for something that happened outside the policy's term.
Insurance companies are designed to provide coverage to those who need it, but if there's evidence that a person filed a claim for damage they caused maliciously or that they're filing a claim for something that happened when they didn't have coverage, then they can be rightfully denied benefits.
What happens if the denial is appealed?
Of course, an insurance company needs to take time to review the appeal. Sometimes, there is more information that clears up any miscommunication and does lead to an approved claim. However, if the claim is denied again and the other party files a lawsuit, this is when an insurance company should provide evidence to its attorneys and be prepared to defend the decision in court if the time comes.