---
name: denial-rationale-letter
source: https://app.decimal.ai/s/denial-rationale-letter@1/SKILL.md
source_sha256: 9cfd7af8118a
---

# Write a denial that could survive a bad-faith review

A denial letter is not a courtesy note that the claim was turned down. It is the document a
regulator, an appeal reviewer, or a plaintiff's lawyer reads line by line to decide whether the
insurer denied for a real, disclosed reason — or acted in bad faith. Left to itself the model
writes the polite, empty version: *"We regret to inform you that after careful review your claim
has been denied because it is not covered under the terms of your policy. If you have any
questions, please contact us."* That letter states no provision, no facts, and no appeal rights.
It is a boilerplate-only denial, and a boilerplate-only denial is the classic bad-faith exhibit.

The discipline: **a denial must say exactly what it denies, name the provision that denies it,
show the facts that make that provision apply, and tell the claimant how to challenge it.** Every
denial letter has to do all four. A denial missing any one of them is not defensible.

## The four things every denial letter must contain

1. **The exact provision — identified and quoted.** Name the provision by its section, paragraph,
   or defined-term heading (e.g. "Exclusion 4(b) — Water Damage"), and quote the operative words
   the insurer is relying on. "Your policy does not cover this" is not a citation; it hides the
   ground of denial. Quote the language as it is written — never paraphrase it into something
   broader or harsher than the policy actually says.

2. **The factual basis — this claim's facts, mapped to the provision.** State the specific facts of
   *this* loss and connect them to the quoted words: what happened, and why those facts fall inside
   the provision. "The reported loss resulted from surface water entering the dwelling, which is the
   circumstance Exclusion 4(b) excludes." A provision with no facts under it, or facts with no
   provision over them, is a reason the reviewer can reject.

3. **What is being denied — in full or in part.** If part of the claim is payable and part is not,
   say so and pay or reserve the covered part; do not deny the whole claim because one piece is
   excluded. If a sub-limit or deductible caps the payment rather than eliminating it, the letter
   allows that amount rather than denying it. Denying in full what is only partly excluded is itself
   an act of bad faith.

4. **Appeal rights and required notices.** Tell the claimant, plainly, how to challenge the denial:
   that they may appeal or request reconsideration, the deadline to do so, their right to a free
   copy of the policy and of the documents and reports the insurer relied on, their right to any
   available independent or external review, and their right to contact the state insurance
   regulator (Department of Insurance). Omitting appeal rights is the omission regulators penalize
   most often.

## Bad-faith traps to avoid

- **No boilerplate-only denial.** "Does not meet the terms and conditions of your policy" is a
  conclusion, not a reason. A denial with no stated ground is presumptively bad faith.
- **State every ground you are relying on now.** If two independent provisions each defeat the
  claim, cite both. Denying on one ground and holding a second in reserve for later can waive the
  reserved ground and looks like sandbagging. Do not deny on a provision that the facts do not
  actually trigger, either — a wrong citation is worse than a thin one.
- **Do not misrepresent the policy.** Quoting a provision but restating its effect as harsher than
  the words support (turning "we do not pay for the cost to repair a defect" into "we do not pay for
  any loss involving a defect") is misrepresentation of policy terms.
- **Do not demand more than the policy requires.** Conditioning the denial on proof the policy never
  asked for, or on an unreasonable evidentiary bar, converts a denial into a bad-faith one.
- **Neutral, non-accusatory tone.** Deny on the coverage ground; do not imply fraud, dishonesty, or
  moral fault unless a fraud/concealment provision is the actual, supportable ground and the facts
  support it. Gratuitous accusation is both bad faith and defamatory exposure.
- **Do not close the door.** The letter states the denial as the insurer's current position on the
  presented facts and invites additional information; it does not declare the matter permanently and
  irrevocably closed.

## Shape of the letter

Open by identifying the claim (claimant, claim/policy number, date and nature of loss) and stating
plainly that the claim is denied in whole or in part. Then, in order: the provision (cited and
quoted), the facts tied to it, exactly what is and is not being paid, and the appeal-rights and
regulatory-notice block. Close with a contact for questions. Keep the tone factual and respectful —
the goal is a letter that a reviewer reading it a year later can see was honest, specific, and fair.