The Proof of Loss
What is a Proof of Loss?
A proof of loss is a document an insured property owner signs, under oath and before a notary public, that states the amount of the claim. The document states the amount of money the insured property owner believes the insurance company must pay to remedy damage to property.
Proofs of loss are required under most property insurance policies. The law regards insurance policies as contracts. One term, or requirement, of an insurance policy is that the insured property complete a proof of loss. State law that mandates insurance policy language for policies that encompass fire, called the standard fire policy, requires the insured property owner complete a proof of loss. Failure to complete a proof of loss can be a breach of the insurance policy.
A proof of loss is an opportunity for property owners. By its nature, a proof of loss requires an insured property owner to sit down and carefully consider the amount of money the insured property owner seeks. A proof of loss is meant to be comprehensive – it’s meant to be everything. It is wise for property owners – and the contractors, public adjusters or engineers that may assist them – to thoughtfully review the damage and the scope of work required to remedy the damage. Some contractors can be in a hurry to get the job started and done. A signed, verified proof of loss is a good reason for everyone to slow down and carefully consider the project.
Best Practices for Completing a Proof of Loss
Insurance companies often have form proofs of loss for property owners complete. It is wise to request such a form from the insurer because when it is complete the property owner can be confident the insurer is satisfied with the response. Proofs of loss created by the property owner may not include all information the insurer feels is required to assess the loss. Indeed, some insurance policies are written such that the proof of loss requirement is only triggered when the insurer sends a policy form to the property owner.
It’s always wise to get a professional to estimate damage. Non-professional property owners are likely to miss damage that is hard to see. Most people are not builders or contractors by trade. Contractors know pricing better than most property owners. The best practice is to ask a professional to estimate the amount of loss and then attach it to the proof of loss.
It is always wise to be make sure all the questions on the form are answered. The date of the loss should be included, as well as the insurance company’s claim number. That information helps speed the insurance company’s review of this important document.
Insurance policy often state a deadline for completing a proof of loss. Property owners need to do their best to honor the deadline. However, sometimes the insurer asks for a proof of loss after the deadline has expired. State law in the three states where I practice requires an insurer to prove a tardy proof of loss actually prejudices the insurance company. The law also requires the insurer to establish a tardy proof of loss is a material breach of contract. The burden an insurer must meet to establish prejudice and materiality is not easy.
The proof of loss is an opportunity because it triggers a deadline for the insurer to react. State laws often require a response within a certain number of days. That deadline is helpful as it keeps a claim moving.
Some state laws recognize a proof of loss as the date when interest on the claim is triggered. It is therefore wise for a property owner to record the date when he or she sent it to the insurer. Most important, completing a proof of loss shows an insured acting in good faith in the claims process by meeting an obligation found in the policy – and often state law.
Contact me if you need help completing a proof of loss.