When your insurance claim is denied, it can feel frustrating and unjust, especially if you believe your damage should be covered. One of the most common reasons insurers deny claims is due to policy exclusions, such as but not limited to, wear and tear, gradual deterioration, lack of maintenance or damage that isn’t tied to a specific insurable event. However, many insurance companies make mistakes when denying claims based on these exclusions because they often overlook the critical concept of proximate cause.

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In this article, we’ll explain why insurers frequently get it wrong and how you can challenge a denied insurance claim if your insurer has made an error.

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Common Reasons Insurers Deny Claims

Insurance policies include exclusions that limit what types of damage are covered. Although these exclusions seem clear, they are often more complex than they appear. Some of the most common reasons for denied insurance claims include:

1. Wear and Tear: Damage resulting from normal aging or regular use.

2. Gradual Deterioration: Damage that occurs over time, such as rust, corrosion, or fading.

3. Damage Not Caused by a Single Insurable Event: Damage that builds up slowly and isn’t the result of a specific accident or sudden event.

4. Lack of Maintenance: Damage caused by not maintaining your property.

 

While these exclusions may apply in some cases, insurers often wrongly decline claims by failing to consider the proximate cause—the primary reason behind the damage. If the proximate cause is an insurable event, the claim should still be covered, even if wear and tear or gradual deterioration are also factors.

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What Is Proximate Cause in Insurance?

Proximate cause refers to the dominant cause of damage or loss. It’s not always the most immediate cause, but the event that truly set the damage in motion. For example, if a storm causes a tree branch to fall on your roof, the proximate cause is the storm, not the fact that your roof may have been slightly worn or old.

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Understanding proximate cause in insurance is key because if the proximate cause of your damage is a covered event, the insurer should pay your claim, even if secondary factors like wear and tear contributed. Insurers often get this wrong by focusing on minor contributing factors and ignoring the real cause of the damage.

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How Insurers Misapply Policy Exclusions

Here are common ways insurance companies misinterpret policy exclusions and wrongly deny claims:

1. Focusing Only on Wear and Tear: Insurers may deny claims on older properties or items by saying the damage is due to wear and tear. However, if a sudden event—like a storm, accident, or fire—caused the damage, the claim should still be covered under the policy, even if wear and tear was present.

2. Ignoring Sudden Events: Insurers sometimes focus on gradual deterioration and ignore the fact that a sudden event was the actual cause of the damage. For example, a pipe might have corroded over time, but if it burst due to freezing temperatures, the burst pipe, not the corrosion, is the proximate cause that should make the damage insurable.

3. Insufficient Investigation: Sometimes insurers don’t fully investigate the cause of the damage. They may reject a claim based on superficial findings without thoroughly identifying the proximate cause. This can lead to an incorrect denial.

4. Misinterpreting Policy Language: Insurance policies are often filled with complex legal terms. Some insurers interpret exclusions too broadly, denying claims that should be covered by focusing too much on wear and tear or gradual damage, rather than the actual event that caused the loss.

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How to Challenge a Denied Insurance Claim

If your insurance claim was denied due to wear and tear, gradual deterioration, or any other policy exclusions, there are steps you can take to challenge the decision:

1. Review Your Insurance Policy: Go through your policy carefully, paying close attention to specific exclusions and clauses related to proximate cause and covered events.

2. Request a Detailed Explanation: Ask the insurer for a full, written explanation of why they denied your claim. This should include how they determined the cause of damage and why they believe it falls under the policy’s exclusions.

3. Gather Evidence: Collect evidence, such as photos, repair records, or independent assessments, that support your claim. If possible, get an independent expert to assess the damage and provide a report.

4. Consult an Insurance Lawyer: If you believe your claim denial was wrong, consider speaking with an insurance lawyer. At Adria Law, we have lawyers who specialise in insurance disputes that can help you understand your policy, determine if the insurer applied exclusions incorrectly, and challenge the denial with the Australian Financial Complaints Authority (AFCA).

5. File a Complaint with the Ombudsman: If you can’t resolve the issue with the insurer directly, you can escalate the matter to the Australian Financial Complaints Authority (AFCA). At Adria Law, we can assist in making a solid case to AFCA, which will then determine whether your claim was denied fairly and may help resolve the dispute. Making an AFCA complaint is free to consumers and is a great and inexpensive alternative to the courts.

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Why Proximate Cause Matters

The concept of proximate cause is essential when challenging a denied insurance claim. For example, if your home’s roof was old and worn, but a heavy storm caused a tree branch to crash into it, the storm (not the age of the roof) is the proximate cause. Since the storm is a covered event under most homeowner insurance policies, the insurer should cover the claim.

Insurers often make the mistake of denying claims by focusing on wear and tear or gradual deterioration when the actual cause of the damage was a sudden, insurable event.

 

Don’t Accept a Denied Claim Without a Fight

If your insurance claim was denied due to policy exclusions like wear and tear or gradual deterioration, the insurer might have gotten it wrong. Understanding the role of proximate cause can help you challenge an unfair denial and get the compensation you deserve.

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Make sure to review your policy, collect relevant evidence, and consult a lawyer to best solidify your case. If your claim is legitimate and the proximate cause was a covered event, you have the right to push back against the insurer’s decision and ensure your claim is handled fairly.

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For expert guidance, consult our expert lawyers at Adria Law. We specialise in insurance disputes and can help you navigate the complexities of your claim to get the outcome you deserve. Don't let an unfair claim denial go unchallenged—reach out to us today for a free initial consultation and affordable fixed fee prices for each project!