National Auto Care Corporation, a third-party administrator of guaranteed asset protection insurance products sold through automobile dealerships, faced regulatory action in multiple states after insurance departments found that the company's claims review process systematically denied or reduced payment on valid total-loss claims through pretextual grounds — invoking technical reasons for denial that regulators found were not supported by the policy language consumers had purchased or the applicable state insurance regulations governing GAP products.DOCUMENTED
GAP insurance — guaranteed asset protection — covers the difference between the actual cash value of a vehicle at the time of a total loss and the outstanding balance on the auto loan or lease. Consumers purchase GAP as protection against the period during the loan term when, due to depreciation, the outstanding loan balance exceeds the insurance payout they would receive from their primary auto insurer if the vehicle were totaled or stolen. The product is almost universally sold by the financing department of automobile dealerships at the time of vehicle purchase, and the administrator who handles claims is typically not a party the consumer selected or directly interacted with.REVIEWED
- State insurance departments in multiple jurisdictions found National Auto Care's claims review process resulted in denial or reduction rates substantially above industry norms
- Denied claims reviewed by regulators showed technical grounds cited by National Auto Care that did not align with the policy language or state regulatory requirements
- Consumers who were denied GAP payments were often unaware of the appeals process or their right to file a complaint with the state insurance department
- Dealerships that sold National Auto Care GAP products received commissions from the administrator, creating an incentive to sell the product but no comparable incentive to assist consumers with claims
- Regulators required National Auto Care to reprocess denied claims and pay interest on wrongly withheld amounts
The Claims Denial Pattern
State insurance department examinations of National Auto Care's claims files found that the company's internal claims review process applied grounds for denial and reduction that the examining regulators found were inconsistent with the GAP product filings that National Auto Care itself had submitted to those states for regulatory approval. The product filings described coverage terms and exclusions in specific language; the claims review outcomes showed denials citing grounds either not included in the filed exclusions or applying exclusions in ways that exceeded what the filed language authorized.DOCUMENTED
Common denial grounds identified in the regulatory examinations included: characterizing a loan payoff amount as higher than the policy covered without applying the correct payoff calculation methodology; citing prior damage deductions using values that were not disclosed to consumers at the time of purchase; and finding that a vehicle modification voided GAP coverage based on an exclusion that the filed policy language did not contain or did not apply as broadly as claimed. Each of these findings, in isolation, might appear as an administrative dispute over policy interpretation; the frequency and pattern across thousands of claims files indicated to regulators a systematic approach rather than individual errors.REVIEWED
Consumers who were denied GAP claims had typically paid several hundred to over a thousand dollars for the product at the time of vehicle purchase — often added to their auto loan and financed over the loan term — and had no reasonable way to independently verify whether the denial grounds applied to their specific policy.
The Consumer's Disadvantage
GAP insurance claims arise at the worst possible financial moment for the consumer — when they have just experienced a vehicle total loss and are dealing with a primary insurer settlement, a lender seeking loan payoff, and the need to obtain replacement transportation. In this environment, consumers are generally not in a position to scrutinize the technical grounds for a GAP denial or to mount an effective challenge without professional assistance. The claims denial process is also frequently opaque: denial letters may cite regulatory section numbers or policy terms that the consumer cannot readily locate in the certificate of coverage they received at closing.REVIEWED
State insurance regulators in the jurisdictions that examined National Auto Care found that the company's denial letters did not provide consumers with meaningful information about how to appeal, what documentation might support reconsideration, or how to file a complaint with the state insurance department. Consumer advocates who submitted amicus comments in the regulatory proceedings characterized the combination of a complex denial basis and a consumer with no time or resources to dispute it as the effective mechanism through which valid claims were converted to non-payments.DOCUMENTED
Required Remediation
State regulatory orders required National Auto Care to reprocess a defined sample of previously denied or reduced claims using the correct policy language and regulatory standards, to pay interest on wrongly withheld amounts from the date of original denial, and to revise its claims review procedures to bring them into conformance with filed policy terms and state insurance department standards. The company was also required in some jurisdictions to improve the information provided in denial letters, including a plain-language description of the consumer's right to appeal and to file a complaint with the insurance department.DOCUMENTED
Consumers who purchased GAP insurance through an automobile dealership and had a total-loss or theft claim denied or reduced should contact the insurance department of their state and request a market conduct examination complaint form. Complaints to state insurance departments are the primary mechanism through which individual claim denials can be reviewed against the policy's filed terms, and state departments are required to investigate complaints within defined timeframes. Consumers can also retain a public adjuster or attorney specializing in insurance claims disputes to review their denial.REVIEWED
Finding Help With Denied Insurance Claims
Consumers who believe their GAP insurance claim was improperly denied have several avenues for redress. Every state has an insurance department that is empowered to investigate market conduct complaints against insurance administrators, and many have specific consumer assistance programs for claims disputes. Filing a complaint with the state insurance department triggers a required investigation under most states' insurance codes, and the department can require the administrator to produce the full claims file and apply the policy's filed terms to the dispute. If the department's review finds the denial was improper, it can order the claim paid. Consumers can also engage a public adjuster — a licensed professional who represents policyholders in insurance claims disputes — or consult an insurance bad-faith attorney if the denial pattern suggests broader actionable conduct. Many attorneys who handle insurance bad-faith cases take cases on contingency, meaning no upfront cost to the consumer, which makes legal consultation accessible even for consumers whose GAP claim amount alone might not justify the expense of litigation.
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