Buildings sometimes burn down or suffer other damage, in whole or in part. When that happens, it is often assumed that some insurance policy or other will cover the loss. But this is only the beginning of the discussion.
Insurance policies generally require the insured party to report any loss or other claim immediately. Failure to do so can spoil or at least impair coverage. In other words, the policyholder cannot sit back and assume that, since there is an insurance policy, the policyholder does not have to do anything.
Conversely, policy often has very specific rules about when, how and to whom a loss should be reported. Failure to comply with these rules can impair policy coverage.
The recent Florida case provides an extreme example. There, Hurricane Irma damaged property in ways that seemed minor. The policy holder accidentally repaired the damage. Later, when the hurricane appeared to have caused other, more serious damage, the policyholder finally filed a claim with the insurance company 27 months after the hurricane.
The lower court noted that the insurance policy required the policy holder to provide “prompt notice” of loss, and concluded that no reasonable jury could find that 27 months qualifies. So the court ruled in favor of the insurance company. Although this decision is now under appeal, it is a good warning for any policyholder.
As a variation on the subject, sometimes one party benefits from another party’s insurance policy. For example, a lease agreement may require the tenant to maintain insurance in favor of the landlord. In the event of a loss, the tenant must definitely file a claim quickly. But the owner must as well. Something might go wrong with the tenant’s claim. The rights of the landlord are often independent of the rights of the tenant. The landlord should not put himself at the mercy of the tenant’s competence to handle claims.
Policyholders often deal with insurance brokers when a loss occurs. Although intermediaries can assist with this process, the policy holder must ensure that they comply with what the policy specifically requires. And the policy will likely require nothing more than a nice gentle chat with your insurance broker to report the claim.
Exceeding the minimum issue for filing a claim, when a loss occurs, the policyholder must look up and read the insurance policy. The policy usually also contains requirements about the information to be provided to the insurance company, access and inspection, and similar procedural requirements. Failure to comply can, again, spoil coverage. And the policyholder must remember that once a claim occurs, some insurance companies start a cat-and-mouse game in which the goal is to deny the claim in some way. The policy holder must plan in advance for this, and do everything necessary so as not to give the insurance company any excuses.
For a claim of any meaningful size, the policyholder may find it helpful to quickly hire a third-party specialist to assist with the process – either a general control officer or a professional lawyer – rather than relying on an insurance broker, whose loyalty can be complex.