There are two types of people in the world: those who have had problems with their insurer and those
who will have problems with their insurer. It’s an unfortunate fact of life, insurance companies are
difficult to deal with. I can’t count the number of clients who have sat in my office and uttered the
words “I paid my premiums, why won’t they do what they are supposed to do?” Frequently, my clients
come to me feeling hopeless because they don’t know what they can do to get their insurer to act
appropriately or what rights they have when it comes to insurance claims. I know it might not always
feel like it, but as an insured, you have rights!

An insurance policy is a contract between you (the insured) and the insurance company (the insurer)
that imposes certain duties and responsibilities on both you and the company. Although there are many
confusing and nuanced requirements within the contract, the most important requirements are
straightforward. This post will explain your rights and duties within insurance contracts. Please keep in
mind that the lists below are nowhere near complete or exhaustive and are subject the facts and
circumstances surrounding each unique claim.


Your Duties Within the Insurance Contract

There are certain things you must do as an insured to ensure that you are keeping your end of the
bargain when it comes to insurance contracts.

First, you must truthfully and totally complete the application for insurance. This often means disclosing
medical conditions, past insurance claims, past or current legal matters, and many other seemingly
unrelated, but ultimately important, details. In many cases, if an insurer can show that the applicant
withheld information or lied on the application, the insurer can say that the applicant made a “material
misrepresentation” and can cancel the insurance policy.

Second, you must pay premiums. This requirement is straightforward. If you fail to pay premiums on
time, your insurer can terminate your policy.

Third, you must cooperate with the insurer. Nearly all insurance contacts impose on the insured a “duty
to cooperate.” This means that when you make a claim for coverage, you must cooperate with the
insurance company in its investigation of the claim. Insurers frequently require you to provide a
“recorded statement” or “examination under oath” where they ask you questions about the claim.
Insurers also routinely request documentation and information from you regarding the claim. You
cannot refuse to cooperate with your insurer’s reasonable requests for your cooperation. If you refuse
to cooperate, your claim can be denied.

These are certainly not all of the duties insureds have within insurance contracts, but they are the most
basic and important.


Your Rights Within the Insurance Contract

Now for the good news, you have Rights!

Just as you have duties under the insurance contract, so does the insurance company. The insurance
company’s duties arise from the insurance contract itself, from state laws governing insurers, and from
historical case law dealing with insurance coverage and claims.

First, in everything they do, insurance companies are required to consider the insured’s interests at least
equal with their own interests. This essentially means that your insurance company must consider your
need to have your claims paid at least equal to its own interest of denying claims to make more profit.
This duty comes from decades of litigation and Court decisions aimed at protecting insureds’ rights.
Second, insurers must act in good faith and treat insureds fairly. While generally not contained in the
text of the policy, many states, Nevada included, impose this duty on insurers through what is
frequently termed the “Implied Covenant of Good faith and Fair Dealing.” Although the technical
requirements of this duty are constantly in dispute between insurance companies and insureds, in a
nutshell, this means that insurance companies must be honest and reasonable when dealing with

Third, insurers must fairly investigate claims, make a claims decision, and pay benefits when due.
Ultimately, this is the practical reason we pay premiums, to have our insurance company pay our claims.
Failure to comply with this requirement commonly forms the basis for lawsuits against insurers by
Fourth, insurers must comply with state laws governing claims handling and insurance company
conduct. Many states have passed laws detailing types of insurance company conduct that are deemed
unacceptable. Nevada Revised Statutes Section 686A.310 outlines several practices that are deemed to
be “unfair practices in settling claims.” Among other practices, the following are considered unfair:
(a) Misrepresenting to insureds or claimants pertinent facts or insurance policy provisions relating to
any coverage at issue.
(b) Failing to acknowledge and act reasonably promptly upon communications with respect to
claims arising under insurance policies.
(c) Failing to adopt and implement reasonable standards for the prompt investigation and
processing of claims arising under insurance policies.
(d) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss
requirements have been completed and submitted by the insured.
(e) Failing to effectuate prompt, fair and equitable settlements of claims in which liability of the
insurer has become reasonably clear.

If an insurer engages in any of these practices, the insured has a right of action against the insurer for its
unfair claims practices.


What Does it All Mean?

The takeaway from all of this is that as an insured, you absolutely have rights. Insurance companies have
contractual and legal obligations to treat you fairly, act reasonably, and pay your claims. When
insurance companies fail to comply with these contractual and legal requirements, they open
themselves up to liability and lawsuits for breach of contract and insurance bad faith. Being an educated
insured and knowing your rights can ultimately spare you and your wallet untold difficulty.