Your commercial property insurance policy is in place to protect your business property from losses caused by covered perils, such as fire, theft, or windstorms. Unfortunately, insurers often look for loopholes to deny or undervalue property claims to protect their bottom lines. To maximize your recovery after a loss, take a strategic, well-documented approach to the claims process and push back on unfair denials or under-valuations by the insurance company.
Understand Your Policy
Read your commercial property policy carefully to understand which perils are covered, and which exclusions and limitations apply. Commercial property policies typically cover direct physical loss to insured property, including buildings, furniture, equipment, and inventory, and outside structures such as fencing and signage, up to the policy limits, after applicable deductibles are satisfied. While policies vary, many commercial property policies cover damage and losses from fire, theft, falling objects, burst pipes, lightning, wind, and wind-driven rain. Common exclusions include damage caused by floods, mold, pollution, and earthquakes.
Business interruption coverage is a popular add-on to commercial insurance policies. It covers lost revenue, fixed costs, and other expenses that the business incurs, up to the policy limits, when a covered peril causes direct physical loss to insured property and leads to the temporary suspension of business operations.
Review your policy to see if you will be reimbursed for “actual cash value” versus “replacement cost.” In a typical policy, losses to physical structures will be reimbursed based on replacement cost, which is the dollar value needed to replace a damaged item with one of similar quality at today’s costs. However, contents will typically be reimbursed based on their actual cash value, which takes depreciation into account and refers to the item’s actual value just before the covered event.
Comply Strictly with Policy Requirements
As a policyholder, it is important to understand your obligations under the policy. Insurance companies typically require insureds to provide them with prompt and proper notice of a loss and their intent to file a claim. Usually, the insurer will send an adjuster to your property to survey the damage. You are required to set aside damaged property for inspection by the adjuster. Your obligations also include taking reasonable steps to prevent further damage, if applicable.
Throughout the claims process, be sure to meet all insurance company deadlines for submitting your sworn “proof of loss” statement and all supporting documentation.
Document Your Losses in Detail
Although the insurer will send an adjuster, you should take your own photos and/or video of the damage. Maintain an itemized list of damaged items and gather receipts and other evidence of their value. Carefully track and save receipts for all expenses that you incur as a result of the covered event.
While the insurer will provide estimates for repairs or replacements, you should get your own price quotes from licensed contractors. This will allow you to make an educated decision about the validity of your insurer’s settlement offer and help you to push back against lowball offers.
Maintain a detailed record and timeline of all your interactions with the insurer.
Challenge Unfair Denials or Underpayments
If your claim is denied or limited, the insurance company will notify you of the reason(s) in writing. If you believe the insurance company wrongly denied, limited, or undervalued your claim, push back with a carefully crafted response. Provide a compelling argument of why you are entitled to full coverage, including additional evidence to support your claim. When an insurance company has denied or limited a claim and is presented with new evidence, it has a good faith obligation to reopen the claim and reconsider its decision.
Consider hiring an experienced insurance attorney to negotiate on your behalf with the insurance company. Your attorney can present the insurer with compelling legal arguments and supporting evidence to support your claim. Insurance companies typically want to avoid litigation, and when presented with strong arguments and evidence from an attorney, they may reverse their position or settle the claim for an amount that is acceptable to you.
Alternate Dispute Resolution
Some insurance contracts dictate that alternative dispute resolution (ADR) must be used to settle the dispute either before or instead of litigation. ADR, which is usually less time-consuming and costly than litigation, includes mediation – a non-binding process in which a neutral third party guides negotiations between the two parties – and arbitration, which can be binding or non-binding. With binding arbitration, the arbitrator renders a legally enforceable decision, which typically cannot be appealed.
Litigation
If all else fails, you can bring a lawsuit against your insurance company. Unlike ADR, litigation provides the insured with the opportunity to add allegations that the insurance company breached its duty of good faith and fair dealing, where appropriate. As bad faith liability carries significant damages, potential bad faith exposure may compel insurers to try to reach a settlement that is acceptable to the insured.
Generally speaking, the vast majority of all insurance disputes settle before they reach the end of trial.
If you have questions about your property insurance claim or you are involved in a dispute with your business insurance company, contact Schwartz Conroy & Hack, PC. We have the expertise, experience, and tenacity to make insurance companies keep their promises to you and your business.
