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Why Insurance Claims Are Rejected in Nigeria and the Legal Remedies Available
Introduction
Insurance serves as an essential financial safety net, protecting individuals, businesses, and organisations from unexpected losses. Whether the policy covers motor vehicles, life, health, fire, marine risks, or professional liability, policyholders expect that when an insured event occurs, their insurer will honour the policy and pay a valid claim.
However, many insurance claims in Nigeria are rejected each year. While some rejections are legally justified because policy conditions have not been met, others arise from misunderstandings of policy terms, procedural errors, inadequate documentation, or disputes over coverage. In certain cases, claims may also be wrongfully repudiated by insurers, leaving policyholders with significant financial losses.
Understanding why insurance claims are rejected and the legal remedies available under Nigerian law is essential for every policyholder. This knowledge not only helps prevent avoidable mistakes but also empowers insured persons to protect their contractual rights when disputes arise.
The Legal Framework Governing Insurance Claims in Nigeria
Insurance contracts in Nigeria are principally regulated by the following legal instruments:
The Insurance Act 2003, which governs the conduct of insurance business, policy formation, premium payment and claims administration.
The National Insurance Commission (NAICOM) Act, which establishes the National Insurance Commission (NAICOM) as the regulatory authority responsible for supervising the Nigerian insurance industry.
The Evidence Act 2011, which regulates the admissibility of evidence and the burden of proof in insurance disputes.
The Constitution of the Federal Republic of Nigeria 1999 (as amended), particularly Section 36, which guarantees every person the right to a fair hearing in the determination of civil rights and obligations.
Beyond statutory provisions, insurance contracts are also governed by the general principles of contract law developed through judicial decisions. Nigerian courts consistently uphold the principle that insurance policies are binding contracts and will generally enforce their terms where they are lawful, clear and freely agreed upon by the parties.
Common Reasons Insurance Claims Are Rejected in Nigeria
1. Material Non-Disclosure
Insurance contracts are contracts of uberrimae fidei (utmost good faith). This principle requires an applicant to disclose every material fact that could influence an insurer's decision to accept the risk or determine the premium payable.
Examples include:
Previous motor accidents
Existing medical conditions
Hazardous occupations
Prior insurance cancellations
Previous insurance claims
Failure to disclose a material fact may entitle an insurer to avoid the policy or reject a claim where the undisclosed information materially affected the insurance contract.
2. Misrepresentation
Closely related to non-disclosure is the issue of misrepresentation.
A policyholder may unintentionally or deliberately provide incorrect information during the proposal stage, such as:
Understating the value of insured property
Providing inaccurate medical information
Misrepresenting the intended use of a vehicle
Giving false information about previous claims history
Where the misrepresentation is material, the insurer may lawfully decline liability under the policy.
3. Non-Payment of Premium
Payment of premium is a fundamental requirement for the validity of an insurance contract under the Insurance Act 2003, subject to recognised statutory exceptions.
If the premium has not been paid as required by law or by the policy, the insurer may not be under any legal obligation to honour a claim.
For this reason, policyholders should always:
Pay premiums promptly;
Obtain official receipts or payment confirmations; and
Keep copies of all policy documents.
Maintaining proper records can be invaluable if a dispute later arises regarding premium payment.
4. Breach of Policy Terms and Conditions
Insurance policies often contain warranties, conditions precedent, and procedural requirements that must be satisfied before a claim becomes payable.
Common examples include:
Failure to notify the insurer within the stipulated time after a loss;
Failure to maintain required security or safety measures;
Failure to provide supporting documents;
Failure to cooperate with the insurer during investigations.
Whether a breach justifies rejection of a claim depends on the wording of the policy and the circumstances of the case.
5. Policy Exclusions
Every insurance policy clearly identifies the risks it covers and those it expressly excludes.
Typical exclusions include:
Intentional or fraudulent acts;
Ordinary wear and tear;
Illegal activities;
War and terrorism (unless specifically insured);
Certain natural disasters;
Mechanical or electrical breakdowns where excluded.
Many disputes arise because policyholders assume that every loss is covered without carefully reviewing the exclusion clauses contained in the policy.
Understanding these exclusions before a loss occurs can prevent unpleasant surprises during the claims process.
6. Fraudulent Claims
Insurance fraud remains one of the leading causes of claim rejection.
Examples include:
Inflated claims;
Forged receipts;
Fabricated invoices;
Staged accidents;
False medical reports;
Deliberate destruction of insured property.
Where fraud is established, an insurer is entitled to reject the claim. Depending on the circumstances, fraudulent conduct may also expose the claimant to civil liability or criminal prosecution.
Burden of Proof in Insurance Disputes
Under the Evidence Act 2011, the burden of proving a claim generally rests on the party asserting it.
Accordingly, a policyholder seeking to enforce an insurance policy must ordinarily establish:
The existence of a valid insurance contract;
Payment of the applicable premium;
The occurrence of the insured event;
Compliance with the policy conditions; and
The extent of the loss suffered.
Conversely, where an insurer relies on fraud, material non-disclosure, misrepresentation, or a policy exclusion as a defence, it bears the burden of proving those allegations with credible evidence.
Documents that commonly prove decisive in insurance disputes include:
Insurance policies;
Policy schedules;
Premium payment receipts;
Photographs;
Police reports;
Medical records;
Expert reports;
Survey reports;
Correspondence between the parties.
Proper documentation often determines the outcome of an insurance claim.
Legal Remedies Available to Policyholders
A rejected insurance claim does not necessarily mark the end of the matter. Nigerian law provides several avenues through which policyholders may seek redress where they believe a claim has been wrongfully denied.
1. Engage the Insurer's Internal Complaint Process
The first practical step is to request a written explanation for the rejection and utilise the insurer's internal complaint or dispute resolution procedure.
Many disputes are resolved through clarification of policy provisions or the submission of additional documentation.
2. Petition the National Insurance Commission (NAICOM)
Where the dispute remains unresolved, a policyholder may submit a complaint to the National Insurance Commission (NAICOM).
As the statutory regulator of Nigeria's insurance industry, NAICOM may review complaints, facilitate engagement between the parties and encourage a fair resolution where appropriate.
3. Alternative Dispute Resolution (ADR)
Many insurance policies contain arbitration or mediation clauses.
Alternative Dispute Resolution offers several advantages, including:
Faster resolution;
Lower costs;
Confidential proceedings;
Preservation of commercial relationships.
For many commercial insurance disputes, ADR provides an efficient alternative to lengthy court proceedings.
4. Civil Litigation
Where negotiations or ADR fail, a policyholder may institute legal proceedings before a court of competent jurisdiction to enforce contractual rights.
Depending on the facts of the case, the court may grant appropriate reliefs, including:
A declaration of the parties' rights;
An order compelling payment of the insured sum where due;
Damages where legally recoverable; or
Any other relief considered just and appropriate.
Nigerian courts have consistently affirmed that insurance policies are legally enforceable contracts and will generally uphold their terms where they are clear, lawful and supported by evidence.
Practical Tips to Reduce the Risk of Claim Rejection
Policyholders can significantly improve the likelihood of a successful claim by adopting the following best practices:
Read and understand the insurance policy before signing.
Disclose all material information honestly and accurately.
Pay premiums promptly and retain proof of payment.
Notify the insurer immediately after an insured event.
Keep receipts, photographs, police reports, medical records and other relevant evidence.
Cooperate fully during claims investigations.
Seek professional legal advice before accepting a claim rejection that appears unjustified.
How SNATHAP Can Assist
At Sun Natha-Alade & Partners (SNATHAP), we provide comprehensive legal services across all aspects of insurance law.
Our services include:
Insurance policy review and advisory;
Insurance regulatory compliance;
Claims advisory and representation;
Mediation and arbitration;
Insurance dispute resolution;
Commercial litigation; and
Corporate risk management advisory.
Whether you are an individual policyholder, a business, or a corporate organisation, our team is committed to protecting your legal interests and ensuring that insurance contracts are enforced in accordance with Nigerian law.
Conclusion
Insurance is intended to provide financial security when unexpected events occur. However, the success of an insurance claim depends on compliance with the policy terms, applicable legislation and established legal principles.
While insurers are entitled to reject claims that genuinely fall outside the scope of coverage or breach contractual requirements, policyholders equally possess the legal right to challenge decisions that are unlawful, unreasonable or inconsistent with the terms of the policy.
Understanding your rights, maintaining accurate records, complying with policy obligations and seeking timely legal advice can greatly improve the prospects of a successful claim while reducing the likelihood of costly disputes.
Disclaimer
This publication is intended solely for general informational purposes and should not be construed as legal advice. Every insurance dispute depends on its unique facts, the specific terms of the applicable insurance policy and the relevant provisions of Nigerian law. Professional legal advice should be obtained before making any decision or taking any action based on the information contained in this article.
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