When you submit a claim to your business insurance company, the insurer will invariably look for a reason to deny all or part of it. By denying or limiting claims, insurers can avoid, reduce, or delay payouts and protect their bottom lines. It’s important for businesses to understand the common reasons for claim denials, so that they can take steps to minimize the risk that their payout will be eliminated, reduced, or delayed.
Late Notice or Late Filing of Claims
Business insurance providers require that policyholders give timely notice of a claim and, in many cases, an occurrence that may lead to a claim. Insurers also have deadlines for filing claim forms and supporting evidence.
Timely notice is required to allow insurers to conduct investigations while witnesses are still available and memories are still fresh. The notice requirement also allows insurers to line up adequate reserves against potential liability and correct dangerous conditions that could lead to more liability. But while insurers require timely notice, the language in policies is typically vague and can be open to interpretation. Insurers may require that notice be provided “immediately,” “promptly,” “as soon as practicable,” or “within a reasonable time.”
To avoid having a claim denied for failure to meet notice or filing deadlines, you should provide notice of a claim or potential claim as soon as possible after an event or loss, and meet all the filing requirements as specified in your policy. If you have several policies that could potentially cover a loss, review each of your policies and provide timely notice to all the insurers that may offer coverage. When disputes arise, courts generally examine the facts and circumstances of the case and determine what a reasonable person would have done under similar circumstances. Certain circumstances may excuse an insured’s failure to provide timely notice, such as if the insured was unaware of a loss or if the insured diligently checked their policies, but nonetheless had a reasonable belief that the loss fell outside the scope of a policy’s coverage.
Incomplete Documentation
Incomplete information or missing documents are major reasons for denials. If you forget to fill in key details on the insurance form, or if you do not provide sufficient evidence to support your claim, your insurance company will not call you up and say, ‘You forgot this; send it now and we’ll process your claim.” The company will deny the claim, which delays processing and keeps your payout in the insurer’s pocket for a longer period of time.
Under the terms of your policy, you are responsible for providing the insurer with certain information and evidence to support your claim. Depending on the type of policy, insurers may need evidence to assess the value of your loss or determine if the loss falls within the scope of the policy. Carefully complete all fields in insurance forms and provide as much supporting evidence as possible with your submission to reduce the risk of a denial for missing information or insufficient evidence.
Exclusions
All insurance policies have exclusions, and if your claim falls within a policy exclusion, it will be denied. However, in many situations, whether the loss is within a policy exclusion is not straightforward. For one thing, a loss may have more than one cause, some of which fall within an exclusion, and others that do not. Commercial property insurance policies, for instance, typically exclude damage caused by flooding, but generally cover damage caused by wind or wind-driven rain. If your property is damaged in a storm, a dispute may arise over whether the damage was caused by floodwater or wind-driven rain.
Whether a loss falls within the definition of an exclusion may also be open to interpretation. For instance, commercial general liability (CGL) policies cover businesses for claims of bodily injury, property damage, and sometimes personal injury brought by third parties. CGL policies typically contain a professional services exclusion, which refers to injury or property damage that arises out of the insured’s provision of professional services. Different policies have different definitions for professional services, and some courts have interpreted which activities constitute professional services more broadly than others.
When submitting claims, it is important to understand your policies’ exclusions and how they are defined in the policy, and, where possible, to provide compelling evidence that the damage or loss resulted from a covered event or peril.
Misrepresentation or Fraud
Providing misinformation on an insurance claim – whether intentional or accidental – can trigger claim denial and potentially other consequences. Inconsistencies in a claim raise red flags, and at minimum will slow down the claims process. If the misinformation is significant enough, it can lead the insurer to deny the claim and potentially investigate the claim as fraudulent. Consequences for insurance fraud can include not only claim denial, but also policy cancellation, fines, lawsuits and even criminal charges.
When filing an insurance claim, be honest and careful. Double-check facts and figures to minimize mistakes that could harm your chances of collecting the payout you are entitled to under the terms of your policy.
If you are involved in a dispute with your business insurance company, contact Schwartz, Conroy and Hack, PC for assistance. We have the expertise and tenacity to make insurance companies keep the promises they make to you and your business.
