Can an Insurance Company Reverse a Paid Claim?

When you successfully file an insurance claim and receive your payout, it can feel like a significant burden has been lifted. However, there are instances when insurance companies may reverse a paid claim, leaving policyholders in a difficult situation. 

As such, we have prepared this post to help you understand the reasons behind such reversals and your rights under Canadian law, as well as the steps you can take to address this kind of issue head on. 

If you are dealing with an insurance claim reversal, whether related to critical illness insurance, property insurance, or any other type of claim, contact McNally Gervan for professional legal support and guidance. 

Reasons for Reversal of Paid Claims

Overpayment Recovery

One of the most common reasons for an insurance company to reverse a paid claim is the discovery of an overpayment. This can happen due to administrative errors or miscalculations during the claim processing. Insurers have the right to recover overpayments for services rendered, repair costs, and the like, but it can be a complex and frustrating process for policyholders.

Discovery of New Information

Sometimes, new evidence or information surfaces after a claim has been paid. This might include additional details about the incident, discrepancies in the initial report, or new findings during subsequent investigations. If this new information significantly impacts the validity or amount of the original claim, the insurer may decide to reverse the payment.

Violations of Insurance Policies and/or Fraud

Insurance companies have stringent policies in place to detect and prevent fraudulent claims. If they discover that a claim involved false information, misrepresentation, or outright fraud, they are likely to reverse the payment. Additionally, if policyholders violate the terms and conditions of their insurance policy, such as failing to disclose relevant information, the insurer may also reverse the claim.

Insurance Policyholder Rights in Canada

In Canada, insurance is regulated at both the federal and provincial levels. Each province has its own insurance regulatory body that oversees the conduct of insurance companies and ensures consumer protections. These regulations are designed to protect policyholders from unfair practices, including the wrongful reversal of claims.

In Ontario, the Financial Services Regulatory Authority of Ontario (FSRA) and Insurance Act cover the rights and responsibilities of insurance holders. 

Bad Faith Lawsuits

Policyholders can sue insurers for bad faith practices if they believe their claim has been wrongfully denied or reversed without a valid reason. Bad faith lawsuits can arise when an insurer fails to meet its legal obligations under the terms of the insurance policy, such as delaying payments without justification or denying a claim without proper unbiased investigation.

Steps to Take If Your Claim is Reversed

Reviewing the Explanation of Benefits (EOB)

When an insurance company reverses a claim, they are typically required to provide an Explanation of Benefits (EOB) or letter detailing the reasons for the reversal and the policy provisions that they are relying on to reverse their decision. Review your insurance contract and this document carefully to understand the insurer’s rationale and identify any potential errors or misunderstandings.

Contacting the Insurer

If you disagree with the claim reversal, the first step is to contact your insurance agent directly. Request a detailed explanation and provide any additional information or documentation that supports your claim in the appeals process. Clear and open communication can sometimes resolve the issue in a timely manner without further escalation.

Filing a Complaint with Provincial Insurance Regulators

For those in Ontario, if you are unable to resolve the issue with your insurer, you can file a complaint with the FSRA, which has some authority to investigate complaints and enforce compliance with the applicable insurance acts and regulations. 

When dealing with complex or contentious claim reversals, it is often beneficial to seek legal advice. An experienced insurance lawyer can help you understand your rights, evaluate the merits of your case, and represent you in negotiations or legal proceedings. Consulting with a lawyer is particularly important if you suspect bad faith practices by the insurer.

Best Practices to Protect Your Interests When Dealing With Insurance Companies

Maintaining detailed records of all communications, documents, and transactions related to your insurance policy and claims is invaluable if you face a claim reversal. These records provide essential evidence to support your case and help resolve disputes more efficiently. Promptly reporting any discrepancies or errors in your insurance policy or claim as soon as you notice them is also crucial. Early reporting can prevent small issues from escalating into significant problems and demonstrate your commitment to transparency and accuracy.

Understanding your insurance policy’s terms and conditions is equally important. Familiarizing yourself with coverage limits, exclusions, and reporting requirements can help you avoid potential pitfalls and ensure you meet all requirements for coverage. This thorough understanding can significantly reduce the risk of claim reversals and keep you better prepared to address any issues that arise.

Contact McNally Gervan for Guidance and Support for Insurance Claims

McNally Gervan is here to protect your rights and help you secure the compensation you deserve. Our team of experienced lawyers provides expert guidance through the complexities of insurance disputes. 

We assist clients with claim reversals, ensuring you understand your rights and options while advocating on your behalf. Beyond insurance issues, our expertise extends to personal injury claims, where we provide comprehensive support for victims of accidents, negligence, and other injuries. With a McNally Gervan Ottawa personal injury lawyer, you have a dedicated advocate who will work tirelessly for the best possible outcome.

For personalized assistance, request a free consultation today.