Disputes are common in the business insurance industry. Businesses who purchase insurance and pay all their premiums expect coverage when they submit a claim. But insurance carriers routinely seek to poke holes in claims and find loopholes to protect their bottom lines. They hide behind crafty policy language that is deliberately ambiguous to try to limit their liability. Fortunately, if you believe your business insurance company has unfairly denied your claim or paid you less than you were entitled to under the terms of your contract, you have several resources available to you.
Appeal directly to the insurance company
The first step is to respond to the insurance company directly. Review your policy closely along with the insurance company’s disclaimer of coverage letter, which will include the insurer’s stated reason(s) for denying or limiting coverage. You can then tailor a written response to the insurer based on the reason(s) for denial. Your response should include your most compelling arguments of why you are entitled to coverage based on the terms of your insurance contract and the facts of the situation. If you have additional evidence that supports your claim, you should submit it at this juncture. An insurance company has a good faith obligation to reconsider a denied claim when presented with new evidence.
Force the insurance company to negotiate
Another option is to hire an attorney with experience in insurance disputes to negotiate with the insurance company on your behalf. Our firm can review your policy and disclaimer of coverage letter to craft a strong response that makes factual and legal arguments and supports them with compelling evidence to convince the insurer that the claim should be paid. In some cases, an insurance company that is confronted with powerful evidence will decide it does not want to risk litigation. The carrier may reverse its decision and cover the claim fully or agree to a settlement that is acceptable to you, making further legal action unnecessary.
Your policy may have an arbitration clause
Some insurance disputes are settled through arbitration, which can be either binding or non-binding, and either mandatory or voluntary. With arbitration, you and the insurance company agree on an arbitrator, who hears arguments and evidence from both sides and then renders a decision. Some insurance contracts include mandatory arbitration clauses requiring that any disputes be resolved by binding arbitration rather than litigation. This puts policyholders at a distinct disadvantage, and, as such, more than a dozen states prohibit enforcement of such clauses in insurance contracts. Although arbitration can offer benefits for both sides – including that it takes less time, it can be less costly, and the case is kept confidential – it is generally more beneficial to the insurance company. Arbitrators are more apt to side with an insurance company, who is much more likely than the insurer to offer the arbitrator repeat business in the future. Further, some clauses mandate that arbitration take place in a particular forum where the laws are more insurance carrier-friendly and which may force the insured to incur costly travel expenses. With binding arbitration, the arbitrator’s decision is final; with very limited exceptions, you cannot pursue further litigation.
Bring the insurance company to court
If negotiations with the insurance company fail to produce an acceptable outcome, you may opt to bring a legal action in court against your insurance carrier, which typically alleges breach of the insurance contract and, in some cases, a breach of the duty of good faith and fair dealing. During the course of litigation, the insurance company will respond to the complaint, sit for a deposition, produce documents and other information, and be required to justify its denial of coverage. Our firm will expertly challenge the insurance company’s reasons for denial, which often leads the carrier to decide to settle the case in order to avoid an unknown verdict. If we believe we have a strong case that the insurance carrier breached its duty of good faith and fair dealing, we can include allegations of bad faith in the lawsuit. Insurers who are found liable for bad faith typically must pay damages well beyond the cost of the claim. Therefore, potential bad faith exposure often incentivizes insurers to try to settle the claim.
If you are involved in a dispute with your business insurance company, contact us. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business.