Auto Insurance Claims: How long can an insurance carrier legally take to set a claim?, Insurance Time Limit to Pay

Question
My vehicle was stolen on 10/15 I reported it to the police and filed a claim that same day. On 10/23 they sent my claim to SIU for review. I have provided them with cell records, text log, two recorded statments, and lien holder information. As of today 11/23/15 they still have not settled on the claim. I call for updates and the handler states she is waiting for more information. I have missed a payment or two on my loan however I had arrangements set up for the past due amount, the handler stated it was concerning but im sure im not the only one in america who has been late on a car payment before but is that enough to deny the claim? Also by law how long can they review the claim before they make a decision? Thanks

Answer
The rules vary by state.  In most cases, the carrier can request an additional 45 days at a time if they need further investigation on a theft or arson case.  

In MA, the carrier has 15 days to acknowledge your claim if they don't pay it before then.  They have 15 days to respond to any subsequent communication from you that reasonably suggests a response is expected.  They have 21 days to accept or deny the claim after they have received properly executed proofs of loss, if they deny, it must be in writing.  NOW, here is the part that most people don't like, so I will quote it for you . . . .  

"B.  If the insurer needs more time to determine whether a first party claim should be accepted or denied, it shall so notify the first party claimant within twenty-one (21) days after receipt of the proofs of loss, giving the reasons more time is needed.  If the investigation remains incomplete, the insurer shall, forty-five (45) days from the initial notification and every forty-five (45) days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation.

When there is a reasonable basis supported by specific information available for review by the insurance regulatory authority for suspecting that the first party claimant has fraudulently caused or contributed to the loss, the insurer is relieved from the requirements of this subsection; provided, however, that the claimant shall be advised of the acceptance or denial of the claim by the insurer within a reasonable time for full investigation after receipt by the insurer of a properly executed proof of loss."  

So what that means is that if they think you might have a reason to commit fraud, like being behind on your payments, they can ask for more time. But, like you said, just being behind on payments is not proof of fraud and once they figure out that you were working with the lienholder on it, they will go ahead and pay the claim.