Can an Insurer Deny Coverage for Not Disclosing Unrelated Past Conditions?

Insurance companies generally require policyholders to disclose certain information when purchasing or renewing a policy, including any medical conditions or history that could affect coverage. However, the issue of denying coverage for failing to disclose past conditions that are unrelated to the current claim is more complex. While insurers do have the right to deny coverage in cases of material misrepresentation or failure to disclose relevant information, they cannot deny a claim based on conditions that are unrelated to the issue at hand.

Can an Insurer Deny Coverage for Non-Disclosure of Unrelated Past Conditions?

1. Duty to Disclose Material Information: Insurance contracts require policyholders to disclose all material facts that could affect the insurer’s decision to provide coverage or the terms of that coverage. If a condition is unrelated to the current claim, it may not be considered material to the claim. For instance, if a person has a history of a past medical condition that is not relevant to the current claim, the insurer may not have the right to deny coverage solely based on the non-disclosure of that condition.
2. Material vs. Immaterial Information: If the undisclosed past condition is unrelated to the current claim, it may not be considered material. For example, a history of knee surgery might be irrelevant to a claim for an eye condition. In such cases, the insurer may not be legally justified in denying coverage unless the failure to disclose was a clear violation of the policy’s disclosure requirements, or unless the insurer can prove that the non-disclosure significantly impacted the insurer’s risk assessment for the policy.
3. Pre-Existing Conditions: If the insurer denies coverage based on a past medical condition that is unrelated to the current issue, it could be challenged. However, some insurance policies have specific clauses regarding pre-existing conditions. These clauses are usually related to conditions that might be directly relevant to the claim, like a medical condition that could exacerbate a current injury. If the past condition has no bearing on the claim, an insurer should not deny coverage on this basis.
4. Good Faith and Fair Dealing: Insurers are required to handle claims in good faith. If an insurer denies coverage due to the non-disclosure of unrelated past conditions, it could be seen as an unfair practice, especially if the past condition had no relevance to the claim. Policyholders have the right to challenge a denial if they believe it is unjust or unreasonable.
5. State Regulations and Consumer Protection: Many states have consumer protection laws that prevent insurers from denying claims or voiding policies based on irrelevant non-disclosures. Insurers must demonstrate that the undisclosed information was material to the claim or to the underwriting process. If the non-disclosure did not affect the risk or the claim, the policyholder may be entitled to coverage.

What Can a Policyholder Do if Coverage is Denied?

1. Request a Detailed Explanation: If an insurer denies coverage based on non-disclosure of an unrelated past condition, the first step is to request a full explanation in writing. The policyholder should ask the insurer to specify how the undisclosed information was material to the claim or the risk assessment.
2. Appeal the Denial: Most insurers have an internal appeals process that allows policyholders to contest claim denials. If the insurer cannot justify how the past condition is relevant, the policyholder can appeal the decision, providing evidence that the condition was unrelated to the claim.
3. Consult with an Insurance Attorney: If the policyholder believes the insurer’s denial is unjustified, it may be worth consulting with an attorney who specializes in insurance law. A lawyer can help assess whether the insurer’s denial of coverage was valid and advise on the best course of action.
4. File a Complaint with the Insurance Regulator: If the policyholder is unable to resolve the issue directly with the insurer, they can file a complaint with the state’s insurance regulator or commissioner. These agencies can investigate whether the insurer’s actions were in compliance with state laws and may be able to intervene on the policyholder’s behalf.
5. Consider Legal Action for Bad Faith: If the insurer’s denial appears to be in bad faith—such as denying coverage for reasons that are unrelated to the claim or ignoring relevant facts—the policyholder may have grounds for a bad faith lawsuit. This legal action could result in the insurer being required to pay damages beyond the original claim amount.

Example

If a homeowner files a claim for water damage caused by a burst pipe, and the insurer denies the claim based on the non-disclosure of a past heart condition unrelated to the damage, the homeowner can:

• Request an explanation from the insurer as to why the past heart condition is relevant to the water damage claim.
• Appeal the decision, providing evidence that the heart condition has no connection to the water damage claim.
• If the appeal is unsuccessful, consult an attorney to discuss possible legal action or a bad faith claim.
• If necessary, file a complaint with the state’s insurance department for investigation.