Legal Definitions - vexatious delay

A vexatious delay occurs when an insurance company unreasonably and without proper justification postpones or refuses to pay a legitimate insurance claim. This often happens when the company acts on mere suspicion, minor technicalities, or without a solid factual basis, causing unnecessary frustration, inconvenience, and potential financial hardship for the policyholder.

Here are some examples illustrating a vexatious delay:

• Example 1: Car Accident Claim

  A driver is involved in a clear-cut rear-end collision, where the other driver is undeniably at fault, as confirmed by a police report and witness statements. The injured driver files a claim for vehicle repairs and medical expenses with the at-fault driver's insurance company. Despite receiving all necessary documentation, including police reports, medical bills, and repair estimates, the insurance company repeatedly delays authorizing repairs or processing medical payments for several months. They might cite "ongoing investigation" without providing any specific reasons for suspicion or requesting new, relevant information, forcing the injured driver to pay out-of-pocket or go without their vehicle.

  This illustrates a vexatious delay because the insurance company is prolonging the resolution of a claim with clear liability and documentation, without a justifiable reason, causing undue stress and financial burden to the policyholder.

• Example 2: Homeowners Insurance Claim

  A homeowner discovers significant water damage in their kitchen due to a sudden burst pipe, a covered peril under their policy. They promptly file a claim, provide photos of the damage, and submit estimates from licensed contractors for repairs. The insurance company, however, takes an unusually long time (e.g., four to six months) to approve the claim. During this period, they send multiple different adjusters, each requiring the homeowner to re-explain the situation and resubmit documents that have already been provided, without ever identifying any legitimate reason to deny the claim or conduct further extensive investigation. The homeowner is left with an unusable kitchen and mounting repair costs.

  This demonstrates a vexatious delay because the company's actions—repeatedly requesting the same information and prolonging the process without a valid basis—are causing unnecessary frustration and preventing the homeowner from repairing their property in a timely manner.

• Example 3: Business Interruption Claim

  A small restaurant experiences a fire that forces it to close temporarily, triggering its business interruption insurance policy. The owner submits a claim for lost income, providing detailed financial statements, tax returns, and records of operating expenses. The insurance company, without identifying any discrepancies or suspicious activity in the provided documents, repeatedly requests additional, often redundant, financial records, sends multiple auditors over several months, and delays processing the claim. This prolonged delay significantly impacts the restaurant's ability to pay its employees, cover fixed costs, and eventually reopen.

  This is an example of a vexatious delay because the insurance company is creating excessive and unnecessary hurdles, prolonging the payment of a legitimate claim without a factual basis, thereby causing severe financial hardship to the business.