When you submit a legitimate commercial property claim to your business insurance company, you expect to receive a timely payment to compensate you for your covered losses. But all too often, insurance companies unfairly slow down pay-outs, preventing businesses from receiving the funds they need to make repairs, replace inventory or equipment, and otherwise recover from an adverse event.
How does the claims process work?
If you suffer losses from an event covered under your commercial property policy, you are required to provide your insurer with prompt notice that you will be submitting a claim. This allows the insurer to mount a timely investigation into the event to determine whether it is liable for all or part of the claim, and to determine the value of the covered losses.
For instance, if a retail store suffers a fire, the insurance company will first investigate the cause of the fire to determine if it is responsible for providing coverage. (The insurance policy may exclude coverage in the event of intentional acts, including arson, or improperly maintained equipment.)
If the insurer determines it has liability under the terms of the policy, it will investigate the extent of the damage to the structure itself, as well as to inventory, equipment, and other contents, and then estimate the value of the losses. Furthermore, if the policy includes business interruption coverage, the business will be eligible for reimbursement for lost revenue, fixed costs, and other expenses, and the insurer will need various documentation to calculate these totals. The insured will be required to cooperate with the insurer’s investigation, submitting documents such as inventory lists and financial records to help prove the value of the losses in accordance with the insurer’s deadlines.
Why do some insurance investigations take longer than others?
In some cases, the insurance claims process can stretch for many months or even years. Many factors can influence the length of the process. Complex claims, such as those involving significant losses, multiple parties, and/or missing information, generally take longer to investigate and resolve than simple, straightforward claims. And when insurers are hit with an abnormally high amount of claims at once – such as in the wake of a major hurricane or the recent California wildfires – the insurer may be overwhelmed by the sheer volume of claims, which can slow down processing.
But beyond these legitimate causes for delays, many insurers deliberately slow down the claims process to boost their profits. By delaying pay-outs, the insurance company gets to hold onto your money longer, allowing it to invest those funds and earn interest while you wait for your check. Insurers are also well aware that small businesses facing long delays in reimbursement may experience financial strain, compelling them to accept reduced settlements simply to access much-needed funds more quickly.
What delay tactics do insurers use?
Insurers slow down the claims process by asking insureds for excessive documentation, such as requiring original documents to prove ownership of assets or receipts for every damaged or destroyed item. When insurers disagree with a dollar amount provided in an insured’s proof-of-loss statement, they can generally delay coverage until that dollar amount is agreed upon, appraised, or adjusted. They may force the insured to jump through hoops, tracking down nonexistent receipts or getting unnecessary appraisals to prove the value of their losses, while more and more time goes by. Insurers may also drag their feet by responding slowly to emails or calls, or by claiming the insured provided incomplete information, thus necessitating document resubmissions. Insurers may also stall the process by changing adjusters, claiming the new adjuster needs time to get up to speed on the file.
Preventing and responding to delays
Read your policy carefully and be sure to fulfill all your responsibilities and meet all deadlines as specified in the policy. Keep a file with thorough records of all your interactions with the insurer. Fill out forms completely and keep copies of your submissions, noting the date and method of transmission. Hold onto any letters and emails you receive from the insurer, and for phone conversations, note the person’s name, title, and contact information, and then document that conversation in an email back to that individual. Ask your adjuster why your claim is delayed and what information is still needed from you. If you get nowhere with the adjuster, ask to speak to a supervisor.
Early in the process, make a list of all items damaged or destroyed and their value, while taking as many photos and gathering as much evidence as possible to support your claim. Be sure to document and retain receipts for any extra expenses you incur in the wake of the event, so that you can submit them to the insurer for reimbursement.
Insurers are subject to state-specific deadlines for approving or denying a claim after all documentation has been received. If an insurer unreasonably delays your claim or doesn’t communicate with you, filing a complaint with your state’s insurance department may help get the insurer to move. You may also file an appeal letter directly with the insurer that states the reason for your communication, recaps your understanding of the reason for the delay, and provides a copy of relevant documentation to resolve the problem.
If the insurer remains uncooperative, consider hiring an experienced insurance attorney to communicate with the insurer on your behalf. When an attorney gets involved and confronts an insurer about unreasonable delays, the insurer may move the claim along and make a payment to avoid potential legal action.
If your business insurance company is unreasonably delaying or challenging your insurance claim, 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.
