After a significant loss, business owners understandably want to put the disruption behind them. Whether the loss involves property damage, business interruption, equipment failure, liability exposure or another covered event, receiving a settlement offer from an insurer can feel like an important step toward restoring normal operations.
But an initial settlement offer should not be viewed as the final resolution. It is important to question whether the insurer’s proposed payment accurately reflects the losses that are covered under the terms of the policy.
The First Offer Is a Starting Point
Insurance claims can involve complex analyses to determine whether a loss is covered and what the value of the loss is. An insurer’s initial assessment may be based on information that was available early in the process, before the full extent of the loss is known.
For a property claim, for example, an initial estimate may not account for concealed damage or the full cost of restoring specialized equipment. In a business interruption claim, the initial calculation may not fully capture lost income or the time reasonably required to return to normal operations. Similar issues can arise in other types of claims. The financial consequences of an insured event may become clearer only after additional investigation, expert analysis, and other evidence comes to light.
Compare the Insurer’s Valuation to Your Evidence
Before accepting an insurer’s settlement offer, carefully review how the insurer arrived at its valuation and compare it with your own documentation. For property claims, compare the insurer’s repair or replacement estimates with bids from independent contractors. Where applicable, scrutinize documents such as receipts, invoices, inventory records, financial statements, sales data, or other evidence demonstrating the financial impact of the loss.
By combing through evidence and examining the policy, you may be able to identify inaccurate assumptions made by the insurer that negatively impacted the valuation and/or limited the scope of what was covered. For instance, when valuing a property loss, the insurer may have applied a repair or replacement cost that does not reflect current market conditions. For a business interruption claim, the insurer may have failed to consider all the extra expenses your business incurred in order to remain operational during the disruption. In other cases, the insurer may have limited the scope of coverage based on its questionable interpretation of a vaguely worded policy exclusion or other provision.
If there are discrepancies, push back on the insurer’s settlement offer by providing a compelling argument of why the amount should be different, backed by as much evidence as possible. When an insurer is presented with additional evidence that materially changes the understanding of a claim, it has a good-faith obligation to reconsider its position and reevaluate its offer.
Hire an Attorney to Negotiate a Settlement
If an insurer refuses to pay the full amount you’re claiming, it does not mean litigation is your only option. Consider hiring an attorney with experience in insurance disputes to negotiate a settlement on your behalf. While a negotiated settlement will likely be lower than the full amount you’re claiming, it could provide several advantages over bringing a lawsuit against the insurer. Depending on the dispute, litigation costs can be significant, and a court case could drag on for months or even years. A negotiated settlement will typically put insurance funds in your pocket much sooner, allowing you to rebuild your company and return to normal operations more quickly. A negotiated settlement also carries less risk, since it allows you to avoid the unknown result at the end of a trial.
When Litigation May Be a Better Alternative
In some cases, rolling the dice with litigation may be preferable to accepting the insurer’s final settlement offer. The appropriate course of action depends on the facts of the claim, the policy language, the evidence supporting the loss and the difference between what the insurer is offering and what you reasonably believe is owed.
A settlement offer may deserve further scrutiny when the insurer’s valuation continues to rely on questionable assumptions, omits significant categories of losses that you reasonably believe should be covered or fails to consider evidence supporting a higher valuation.
It’s also important to understand what rights you may be giving up by accepting the settlement. Depending on the settlement agreement language, accepting payment may resolve not only the amount currently in dispute but also future claims arising from the same loss. Before agreeing to a settlement that may permanently bar further recovery, it’s important to know the full scope and value of the claim.
Summing It Up
An attorney experienced in insurance disputes can help you determine if a settlement offer is a reasonable resolution of the covered claim. In some cases, the right answer may be to accept the insurer’s offer and move forward. In others, additional negotiation and documentation may produce a substantially better settlement. And where the insurer’s position cannot be reconciled with the policy or the evidence, litigation may be necessary to enforce your rights under the policy.
If your business insurance company has denied or is challenging your claim, contact Schwartz Conroy & Hack, PC. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business.