PROPERTY CLAIMS:  YOUR OWN PROPERTY - GETTING PAID

Property insurance policies all contain requirements for reporting & proving your loss. Some even include a specific number of days allowed. If you fail to comply, your claim may be rejected, even if the policy would otherwise pay. This is why it's so important to contact your agent immediately, even if you do not yet have much information to report. Once an adjuster is assigned, you'll be asked to provide documents showing what was lost or damaged, how it happened, and what it's worth. Then you'll be asked to sign a sworn statement, referred to as a "Proof of Loss."   Your objective should be to comply with the policy requirements, and nothing else. (Don't chat with the adjuster about anything. Don't offer theories. Give him/her what is requested, volunteer nothing else. Friendly chatting with claims adjusters is like talking to the IRS. You can only lose.)

Your report must specify what caused your loss.  Perils such as fire, smoke, vandalism, theft, water damage (not flood), wind, other accidental physical damage are common causes and, subject to individual policy terms, not problematic. Reports listing property which merely disappeared, deteriorated or was damaged due to age or overuse, property damaged by insects or rodents, other nonspecific, non-accidental descriptions lead to unpaid or heavily discounted claims. Violation of protection requirements (Alarms, fire sprinklers, etc) or coinsurance clauses can also void or impair your claim. Obvious & intentional misrepresentations made on your original application for insurance ordinarily void your policy. (If your candle shop also manufactures some fireworks, there's a problem.) Discuss your loss fully with your broker-agent before the initial report is made, and prepare for anything that is considered a potential issue.

Fraud is a widespread and costly threat to insurers. (Estimates run from $20-$60 billion.) They are beginning to employ advanced and highly sophisticated defenses, everything from stress analysis of recorded statements to predictive modeling, to widespread database searches scanning for organized or repetitive criminal fraud. Claims models are not unlike IRS models in selecting individual files for a closer look, but probably much better.

Consider whether you might be killing the insurance goose. If you have had a string of claims over the past few years, and this one is smaller, consider paying out of pocket. Carriers actually tend to regard you as a problem more readily when you demonstrate "Frequency."  (clusters of claims.) There is a tipping point beyond which you are almost certain to be non-renewed. You then become "distressed business," and may find other insurance far more costly, more limited, hard to find. Insurers can often be forgiving of single claims, even large ones, as long as they don't indicate carelessness or fudging on your part.

You do have remedies when the carrier doesn't play fair. Your state insurance department regulates admitted insurers & provides a means for having your claim contested. There is no cost, and insurers don't much enjoy documenting & explaining their behavior to insurance regulators. Some states have very specific time parameters for insurers to respond and/or pay, and penalties if they don't. A filed complaint can work near-miraculous overnight changes when the adjuster has been clearly unfair or non-responsive. If you are still dissatisfied after the regulators, a good attorney with experience in this specialty may be the best option. There are also public adjusters who will, for a fee, prepare your proof and push it through with the insurer. This may be a prudent method when your loss is sizable and complicated.

 

LIABILITY CLAIMS: GETTING SUED - GETTING AN ATTORNEY

These policies also have specific reporting requirements .  If you do not report a claim promptly, and the insurer considers your delay to have impaired their settlement possibilities, they may deny coverage & hand it back to you. There are also wide variations in reporting requirements, i.e. some policies require you to report almost any type of demand or occurrence likely to lead to a demand. Much depends on the type of liability insurance. There is also a potent risk in trying to handle small claims on your own. Unlike claims on your own property, you have no effective control over the eventual size of a liability claim. The claimant and his/her attorney decide that. An incident which might initially seem to be no big deal can explode into thousands. If you've not reported it, you could be left to defend yourself. In so-called "Claims-made" policy forms, the reporting requirements become even more onerous. Small, property damage-only claims may be possibilities for settlement outside the policy, but as a general rule it is never ever prudent to attempt settling an injury claim alone.

If you have been actually served with a lawsuit, the insurer should immediately assign your case to an adjuster, who then would pass the file along to legal counsel to answer on your behalf and prepare your defense. (Some errors & omissions and other specialty types of policies may allow you choice of your attorney, subject to certain approval conditions.) With virtually no exceptions, liability insurance policies provide you with legal representation. Some policies impose a deductible, and some include the legal defense costs in the policy limit.

The insurer's initial response is to scrutinize the claim against you to determine whether there is any basis whatsoever for denying you coverage. This may seem sinister, but is actually dictated by the legal system. Insurers have been punished mercilessly for participating in a claim and later withdrawing. They have learned from dreadful experience that even the slightest likelihood of a coverage issue must be asserted at the very outset, or they legally forfeit any right to it as a practical matter. If the adjuster considers the claim against you to be outside the scope of the policy, you'll receive a declaration citing the specific policy language and/or other evidence which is thought to void your coverage. This does not necessarily mean you won't still be defended. (See "Getting a defense") If the insurer thinks their denial is bulletproof, they may refuse outright to defend you, and you are then on your own to obtain legal counsel.

You can and should read the exclusions in your policy before reporting a claim. Sure, policies are hard to read, but the section listing the exclusions is usually pretty easy to find, and the actual exclusions pretty plainly written. Have your agent send you a copy if you can't find it. Your report should comply with the policy requirements and nothing else. The adjuster will then ask for whatever additional detail or documents are needed, and you are obliged by the policy conditions to cooperate.

Your remedies when insurers improperly delay or refuse to cover your liability claims are much the same as with the property category. A complaint to state insurance regulators may change the insurer's attitude. A letter from your own attorney refuting the adjuster's denial can also spur change.

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