What Is an Insured’s Obligations Regarding Property Claims?

Property Claims

Property insurance policies require that policyholders meet certain obligations with regard to claims. As a commercial property policyholder, it is important that you know and understand your responsibilities under the policy. If you fail to meet these obligations, you can rest assured that your insurer will use your misstep against you to deny or limit coverage. 

Provide Prompt Notice of Claims

Insurance policies generally contain provisions requiring that you give prompt notice to the insurer of a claim or an occurrence that may give rise to a claim. For instance, your insurer will want to know right away if there was a fire or a theft at your business property. This provision allows insurers to protect their interests in a number of ways. First and foremost, they can quickly mount investigations while any witnesses are readily available and the events are fresh in their minds. As one court stated, a notice requirement “enable(s) the insurance company to make an investigation before the scent of factual investigation grows cold.”1 Knowing about imminent claims as early as possible also allows insurers to adjust their practices to ensure they have the reserves in place to meet their obligations. And depending on the situation, prompt notice allows insurers to correct dangerous conditions that could give rise to additional liability. 

In most cases, notice provisions are not specific as to the amount of time an insured has to notify its insurer of a potential claim. Rather, the language may state you are required to provide notice “as soon as practicable,” “immediately” or “within a reasonable time” after damage occurs and when you find out or should have found out about it.  

Set Aside Damaged Property and Protect It from Further Damage

Property insurance policies typically impose duties on insureds with respect to damaged property. As the policyholder, you are generally required to set aside damaged property to allow for its inspection. Furthermore, in addition to promptly notifying the insurer of the damage, you will typically be required to take all reasonable steps to protect covered property from further damage. For instance, upon learning of a burst pipe that caused water damage at your property, reasonable steps may include turning off the water, mopping up excess water and making emergency repairs to seal the leak temporarily. Taking photos of the damage and documenting and saving receipts for any interventions you undertake to prevent further damage is always a good idea. 

Provide Proof of Loss  

In accordance with the policy before you can recover any losses you will be required to provide a sworn “proof of loss” which is a statement detailing the amount of the loss. Failure to provide this statement within the required time period may result in loss of coverage. However, some jurisdictions will not allow for coverage to be barred unless the insurer issued a formal, written demand for a proof of loss.  

When insurers disagree with the amount specified in the insured’s proof of loss, they are generally allowed to delay coverage until the amount of loss is agreed upon, appraised or adjusted. Insurers purposely delay claims by requiring business owners to submit burdensome documentation to prove their ownership and the value of their losses. Early in the process, make a list of all items lost and their value, while taking as many photos and gathering as much evidence as possible to support your claims. Do not include items that were not in fact lost; fraudulent proof of loss statements could result in the entire claim being voided as a matter of law.  

Suit Limitation Clauses

Beware that many policies contain suit limitation clauses, which limit the amount of time you have to bring a legal action against your insurer. Typically, lawsuits must be started within one or two years of the date of the loss. Courts in many states have ruled that these clauses are enforceable, even if they are shorter than the jurisdiction’s own statute of limitations.  

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. 

1 Dalzell v. Northwestern Mut. Ins. Co., , 103, 32 Cal. Rptr. 125, 129 (3d Dist. 1963)