Commercial property insurance safeguards a business against losses to physical assets that are caused by perils covered under the policy. Unfortunately, having a property insurance policy and paying your premiums on time does not guarantee the insurer will cover your losses. Insurers commonly look for loopholes to deny, limit and delay claims in order to protect their bottom line. If your insurance company denies or undervalues your claim, here are some strategies for recovering the funds you are entitled to under the terms of your policy.
What Commercial Property Insurance Covers
Commercial property insurance covers physical property, including buildings, equipment, furniture, inventory and outside structures, such as fencing and signage, from covered perils, up to the policy limits. Policies vary, but commercial property policies commonly cover damage from fire, wind and wind-driven rain, theft, falling objects, burst pipes and lightning. Floods and earthquakes are generally excluded. Many policyholders opt for business continuation coverage as an add-on to their commercial property policy. Business interruption insurance covers lost revenue, fixed costs and other expenses, up to the policy limits, that a business incurs when a covered peril causes direct physical damage to the insured property and this damage leads to the temporary suspension of business operations.
Filing a Claim
Policyholders have certain obligations with regard to claims, and it is important to fulfill all of your responsibilities in accordance with the policy – to avoid handing the insurer a reason to deny or delay your claim. You are required to promptly notify your insurer of the adverse event and your intent to file a claim. If you do not have a complete copy of your policy, request one and ask your insurance company representative or agent to walk you through the coverage you have and the most effective way to claim your benefits. Be sure to document all conversations.
The insurance company will send an adjuster to your property to survey the damage. Depending on the circumstances, you are generally required to take reasonable steps to prevent further damage, such as turning off the water and mopping up excess water following a burst pipe. You are also required to set aside damaged property to allow for it to be inspected by the adjuster. It is also important to meet all insurance company deadlines for submitting your sworn “proof of loss” statement and other information.
Although the insurance adjuster will document damage, you should also document the damage yourself with photos and/or videos. Keep an itemized list of damaged items and their value, and gather receipts and other evidence. Carefully track and save receipts for all expenses that you incur to allow business operations to continue, such as relocating temporarily to another building.
If Your Claim Is Denied or Undervalued
If the insurance company denies or limits your claim, you will be notified of the reason(s) in writing. For instance, the insurer may claim the damage was caused by a peril that is excluded under the policy. Or the insurer may say there is insufficient evidence that the damage was in fact caused by this event and was not pre-existing. With property claims, insurers also commonly disagree with business owners about the value of the losses.
If you believe the insurance company wrongly denied or limited your claim, carefully craft a response to the insurer. Review your policy and your previously submitted claim and, based on the insurer’s stated reason(s) for denial, provide a compelling, thorough argument of why you are entitled to coverage. Include additional evidence to back up your claim. For instance, if the insurer claims that the damage was pre-existing damage, include more photos of the property from both before and after the recent event. If the insurer is undervaluing your losses, present as much evidence as possible to support your claimed value.
When an insurance company has denied a claim and is presented with new evidence, it has a good faith obligation to reopen the claim and reconsider its decision.
Hire an Attorney to Negotiate with the Insurer
Consider hiring an experienced insurance lawyer to force the insurer to negotiate. Your attorney can advocate for your position by presenting the insurer with compelling legal arguments and supporting evidence. Insurance companies typically want to avoid litigation and the unknown verdict at the end of the trial, and when presented with strong arguments and evidence from an attorney, some will reverse their position on a claim. In other cases, the insurer may agree to settle the claim for an amount that is acceptable to you.
Alternate Dispute Resolution
If negotiations fail, some insurance contracts require that alternative dispute resolution (ADR) be used to settle the dispute either before or instead of litigation. One form of ADR is mediation, a non-binding process in which a neutral third party guides negotiations between you and the insurance company. The mediator does not render a decision, but facilitates discussions to help you and the insurer arrive at an agreement. When successful, mediation can be a relatively quick, inexpensive way to resolve disputes. But when it fails, you will be back to square one, with nothing to show for your investment.
In arbitration, another form of ADR, you and the insurance company present your arguments and evidence before a neutral arbitrator, who then decides the outcome. More formal than mediation, arbitration can be binding or non-binding; with binding arbitration, the arbitrator renders a legally enforceable decision, by which both you and the insurer must abide. Binding arbitration is generally less costly and time-consuming than litigation, but if you are unhappy with the decision, your appeal options are practically nonexistent.
Litigation
Another option is to bring a lawsuit against your insurance company in court. Over the course of litigation, the insurance company will respond to the complaint, sit for a deposition, produce documents and information and try to justify its denial of coverage. Unlike binding arbitration, litigation provides you with appeal options if you are unhappy with the result. Also unlike arbitration, it gives you the ability to add allegations that your 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.
Generally speaking, the vast majority of cases settle before the end of trial. Entering into a settlement agreement allows both you and the insurance company to save time and costs, as well as the unknown result.
If you are involved in a dispute with your insurance company, contact Schwartz Conroy & Hack. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business.
