Every time you turn around, you hear about another regulation or piece of legislation cutting your profits or making it more difficult for you to run your business. It’s worth remembering, however, that some statutes and rules are squarely on your side; you have options and opportunities you may not realize or have forgotten about.
Insurance claims is one of those areas.
The importance of full and frank discussions with your broker to ensure you have the right policies in place to protect your business can’t be overstated. It’s a fact of life: Sooner or later, you will need the protection those policies provide.
Let’s say, for instance, that a massive hailstorm beats the crap out of your roof or a pipe bursts, flooding several guest rooms. Assuming that your broker has taken care of you and the cause of the damage is covered under your policy, you likely are in a better position than the insurance company might want you to believe.
Insurance companies are in business to earn a profit, and they do that by paying out less in claims than they receive in premium payments. (OK, it’s more complicated than that, but boil it down to its essence, and that’s what you get.)
There’s nothing wrong with that, in theory. But an insurer reducing the amount it has to pay by making it more difficult for its insured (you) to file claims for covered damages not only causes delays and frustration, it might be illegal.
Eight General Insurance Principles
When a policyholder (that’s you) files a claim, specific rules govern an insurance company’s conduct. The rules vary from state to state. In some, they are statutory guidelines. In others, they are directives issued by the state government’s regulating body. In every state, however, standards and rules exist, and most are crafted to protect you, not the insurance company.
Those guidelines can be summarized in the following eight principles:*
- The insurance company has exclusive control over the evaluation, processing, and denial or payment of claims.
- You have an obligation to let them know that your property has – or potentially has – been damaged by something covered by the policy. After that, the ball is in their court.
- The insurance company must look out for your interests at least as much as it does its own.
- Filing a claim does not create an adversary situation; it’s not you against them. The duty of good faith and fair dealing is still alive and well, although some insurance companies act as if it’s a thing of the past. In some states, statutes impose the duty on the company and define its features. In others, the duty is implied by law, and courts enforce it according to past decisions within the state.
- Part of the claims adjuster’s job is to assist the insured with the claim.
- It’s not their job to make things difficult for you, even though it sometimes seems like it is.
- It’s the insurance company’s obligation to conduct a full, fair, and prompt investigation of the claim at its own expense.
- Many times, the insurance company will tell you that you should hire experts to verify and quantify the loss. While it sometimes is in your interest to do that, you are not required to do so. Once you have reported the loss, the onus is on them to send appropriate personnel to verify its existence and extent.
- An insurance company must have a reasonable basis to resolve questions in its favor and against its policyholder.
- You know the baseball expression, “Tie goes to the runner”? In insurance claims, you’re the runner.
- The insurance company must diligently search for and consider evidence that supports the claim.
- They can’t just look for ways not to pay you. The opposite is true: They have to look for the things that favor your side.
- The insurance company may not intentionally underpay the claim.
- If the evidence establishes a given amount of damage, they must make payments equal to that damage.
- Intentionally ignoring or minimizing damage is bad faith.
- Again, the duty of good faith and fair dealing is still kicking. Deliberately making light of the harm suffered violates that duty.
Statutory Deadlines, with Teeth
Deadlines exist for your insurance company to take specific steps to move the claims process along, such as sending people to conduct that full, fair, and prompt investigation mentioned above. Those deadlines start to run when you report the loss, and usually, there are particular requirements for triggering the clock. Once the clock is running, though, it keeps on ticking.
Every state in the union but one has some version of a Prompt Payment of Claims statute that requires the insurance company to process a claim and issue payment within a specified time or risk some penalty.
Sometimes those penalties include additional payments to the insured calculated as a percentage – or some multiple – of the amount of the loss. Sometimes, they include making the insurance company liable for attorney’s fees.
The point is: an insurance company that treats its insured unfairly and delays payment of the claim beyond the applicable deadline does so at its peril.
Let Experts Handle It – at No Up-Front Cost
You have a lot on your plate. Always. And when something happens that triggers your insurance coverage, it just feels like piling on.
You know the value of consulting experts; you do it every day, from plumbers to architects to CPAs. Why should it be any different when it comes to dealing with a recalcitrant insurance company?
You don’t know the deadlines and other requirements the insurance company has to abide by, nor should you be expected to. So, why not turn to someone who does?
Some lawyers specialize in representing businesses that have damage claims against insurance companies. It quite literally is their business to know what insurers have to do and when they have to do it to stay within the law.
It’s also their business to maximize the money you recover from your claim.
You might hesitate to turn to a lawyer because, let’s face it, lawyers are expensive. You’re already having to deal with a loss of some sort. Adding attorney’s fees to the expense of the loss feels like twisting the knife.
Some lawyers who specialize in these cases work on a contingency basis. That means you pay no attorney’s fees or claim expenses until – and unless – you collect money from the insurance company.
Sometimes, when you suffer a loss and have to file a claim with your insurance company, you may have options and opportunities you don’t realize.
Marc Gravely is the founder of Gravely PC, a Texas-based firm devoted to insurance claim and construction defect disputes on behalf of businesses, homeowners associations and related organizations, and governmental entities.
*Cf. Friedman & Malone, Rules of the Road, 2010