The question of when an insurer may refuse to pay out is one of the most frequently asked questions in insurance law. You pay a monthly premium and expect the insurer to pay out when you suffer damage. Yet there are situations where the insurer has the right to refuse a payout. But this right is not unlimited. The insurer must adhere to statutory rules and the policy conditions, and not every refusal is justified. In this article, you will read in which cases an insurer may refuse the payout, what limits are set to this, and what you can do if you disagree with the refusal.
Statutory grounds for refusing a payout
The law provides insurers with a number of grounds on which they may refuse a payout. These grounds are laid down in Book 7, Title 17 of the Dutch Civil Code (Burgerlijk Wetboek, BW). It is important to know that these grounds are exhaustive: the insurer cannot simply invent its own reason not to pay out.
Fraud and intentional deception
Pursuant to Article 7:941 paragraph 5 of the Dutch Civil Code (BW), the right to a payout lapses if the insured intentionally misrepresents the facts with the intent to deceive the insurer. This is the most severe ground and is invoked in cases of insurance fraud. The insurer must, however, prove that there was an intent to deceive. The burden of proof for this rests with the insurer.
Breach of the duty of disclosure
If the policyholder breached the duty of disclosure when taking out the insurance, the insurer may refuse or reduce the payout. The consequences depend on whether there was an intent to deceive and on the influence the concealed information would have had on the insurer’s acceptance decision.
Non-compliance with obligations after damage
After damage has occurred, the insured has a number of obligations. For example, the insured must report the damage as soon as possible, take reasonable measures to limit the damage, and fully cooperate with the insurer’s investigation. If the insured fails to comply with these obligations and the insurer’s interests are harmed as a result, this can be a ground to refuse or reduce the payout.
The intent clause (opzetclausule)
The intent clause (opzetclausule) in liability insurance excludes coverage for damage resulting from unlawful acts committed intentionally and directed against a person or property. If the insurer successfully invokes the intent clause, it is not obliged to provide coverage.
Policy conditions as a ground for refusal
In addition to the statutory grounds, the insurer can invoke the policy conditions to refuse a payout. The policy conditions determine what is and is not covered and under what circumstances the insured can claim a payout.
Exclusions in the policy
Virtually every insurance policy contains exclusions. These are specific situations or types of damage for which the insurer does not provide coverage. Common exclusions are damage caused by war or terrorism, damage caused by wear and tear or lack of maintenance, damage resulting from being under the influence of alcohol or drugs, and damage to items not listed on the policy. The insurer may refuse to pay out if the damage falls under an exclusion, but bears the burden of proof that the exclusion applies.
Coverage limitations Some policies contain coverage limitations in the form of deductibles, maximum payout amounts, or specific conditions that must be met. For example, if you have home contents insurance with a burglary clause that requires your home to be equipped with certain locks and you have not met this requirement, the insurer may refuse or reduce the payout.
Preventive obligations
The policy may contain preventive obligations, such as taking security measures or regularly maintaining installations. Failure to comply with these obligations can be a ground for the insurer to refuse the payout, provided there is a connection between the non-compliance with the obligation and the damage.
When may the insurer not refuse?
At least as important as the question of when an insurer may refuse to pay out, is the question of when it may not. There are limits to the insurer’s possibilities for refusal that protect you as an insured party.
Insufficient evidence
The insurer may not refuse a payout based merely on suspicions or insufficient evidence. If the insurer claims that there is fraud or concealment, it must substantiate this with concrete facts and evidence. A rejection based solely on a gut feeling or statistical probabilities is legally untenable.
Unclear policy conditions
Policy conditions must be clear and understandable. If a policy condition is open to multiple
interpretations, it is interpreted against the insurer and in favor of the insured based on the contra proferentem rule. An insurer that invokes a vague or unclear policy condition to refuse a payout runs the risk that the court will reject this interpretation.
Disproportionate measures
The insurer’s measures must be proportionate. Completely refusing a payout for a relatively minor violation of the policy conditions can be disproportionate. In that case, the court may rule that the insurer may only partially refuse the payout or that the refusal is entirely unjustified.
Breach of own obligations
If the insurer itself fails to fulfill its obligations, it cannot in certain cases demand that the insured fulfills theirs. For example, if the insurer waits an unreasonably long time to process a claim or if the damage investigation was carried out carelessly, this can weaken the insurer’s position.
The role of reasonableness and fairness
Dutch insurance law is partly governed by reasonableness and fairness (redelijkheid en billijkheid). Article 6:248 paragraph 2 of the Dutch Civil Code (BW) stipulates that a contractual provision does not apply insofar as this would be unacceptable according to standards of reasonableness and fairness in the given circumstances. This means that the court can rule in exceptional cases that an insurer, despite a contractual ground to refuse, must still pay out because the refusal is unacceptable according to standards of reasonableness and fairness. In case law, this restrictive effect of reasonableness and fairness is applied with restraint, but there are known cases where the court has ruled that refusing a payout based on a policy condition was not acceptable in the specific circumstances. This provides a safety net for insured parties in poignant cases.
The role of experts in refused payouts
In disputes over a refused payout, experts often play a decisive role. The insurer often bases its refusal on reports from experts it has engaged, such as loss adjusters, technical investigators, or medical advisors. It is important to realize that these experts work on behalf of the insurer and that their conclusions do not always have to be objective. You have the right to engage your own expert for a counter-expertise (contra-expertise). An independent expert can test and possibly refute the findings of the insurer’s expert. If the conclusions of both experts diverge, the court can appoint a third expert to settle the dispute. Engaging a counter-expert can make a significant difference in the outcome of your case.
The influence of previous claims on a new refusal
It may happen that the insurer refuses a payout partly based on previous claims you have submitted. Insurers keep track of your claims history via the Central Information System (Centraal Informatiesysteem) and can use a pattern of frequent claims as an argument to assess the current claim more critically. Although the fact that you have submitted claims previously is not in itself a reason to refuse a new claim, it can be a reason for the insurer to conduct a more extensive
investigation. It is important to know that each claim must be assessed on its own merits. The insurer cannot reject a new, valid claim simply because you have claimed damage multiple times in the past. If the insurer rejects your claim on grounds related to previous claims, it is important to critically assess whether these grounds are legally tenable. A specialized lawyer can advise you on this.
Steps you can take in the event of a refused payout
If your insurer refuses to pay out, it is important to proceed in a structured manner. The following steps will help you strengthen your position. First of all, ask for a written and reasoned rejection. The insurer must clearly explain to you on what ground it refuses the payout and to which policy conditions or statutory provisions it refers. Subsequently, it is wise to request the investigation file and carefully study the policy conditions. Check whether the ground cited by the insurer actually applies to your situation. If you disagree with the refusal, you can submit a notice of objection to the insurer. If the insurer maintains its position, you can file a complaint with the Financial Services Complaints Tribunal (Kifid) or start proceedings in court. In all cases, it is advisable to seek legal assistance, because disputes about refused payouts are often legally complex.
Time limits for refused payouts
When challenging a refused payout, it is important to pay attention to time limits. The limitation period for claims arising from insurance contracts is in principle three years, calculated from the moment the payout has become due and payable. If you wait too long to bring a claim, your right to challenge the refusal may become time-barred. It is therefore important to take timely action.
Subsidized legal aid
A dispute with your insurer about a refused payout can be financially burdensome. If your income is limited, you may be eligible for subsidized legal aid via the Legal Aid Board (Raad voor Rechtsbijstand). With a grant of legal aid (toevoeging), you only pay a limited personal contribution and the remaining lawyer’s fees are borne by the government. This ensures that professional legal help is also available to people with a lower income.
Engage a specialist for a refused payout
The question of when an insurer may refuse to pay out cannot always be answered easily. The legal assessment depends on the specific facts, the applicable policy conditions, and the relevant legislation. A specialized lawyer can assess your case and advise you whether your insurer’s refusal is justified or whether there are possibilities to still obtain the payout.
Has your insurer refused to pay out and do you want to know if this is justified? Contact us for a no-obligation assessment. We analyze the grounds for refusal, assess your policy conditions, and advise you on the best strategy to still realize your right to a payout. Do not wait too long to take action, because time limits are of great importance in insurance law.
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