General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insured sues an insurer for refusing to pay a covered claim that the policy clearly promised to pay. The cause of action is most likely based on:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The insurer's refusal to pay benefits promised in the policy is a breach of the insurance contract. The remedy is contract damages — the benefits owed under the policy, and possibly more in bad-faith cases. Contract law, not tort or criminal law, governs the insurer's duty to pay covered claims. Claim denials are disputes about contract performance, not negligence or crime.
Why the other options are wrong
- B) A simple refusal to pay is not a tort of negligence; torts may arise in extreme bad-faith handling, but the core claim is breach of contract.
- C) Claim denials are civil disputes; they are not crimes merely because the insurer refuses to pay.
- D) Policyholders have the right to sue for breach of contract after a claim denial; legal action is absolutely possible.
Memory hook
Promise broken = breach of contract. The policy is the promise, and the benefits are the measure of the damages.