Here are five reasons why insurance companies deny insurance claims, and an overview of what you can do about it.
A Different Cause
Insurers will view property damage and decide that the cause of the damage is something other than what you claim. You may say the damage was due to hail, and the insurer may say it’s age. You may say the sofa has smoke damage, the insurer may say it is wear and tear. These are causation arguments. You and the insurer dispute the cause of the damage.
What You Should Do. Find an expert in this field who will give an opinion on the cause. If the expert agrees with you, put the opinion in writing and forward it to the insurance company. You may need to concede the point if the expert agrees with the insurance company.
Policy Exclusions
Insurance policies often include exclusions tied to the cause of loss. Water claims, often derived from pipe bursts or cold weather, come with many exclusions. One common exclusion is leakage or seepage that occurs over a long period of time. Insurance companies will rely on exclusions like these to deny a claim.
What You Should Do. Tell the insurance company you want the denial in writing. Usually that denial will quote the exclusion from the policy, or at least refer to it to you can find it in your policy. Get a copy of your policy and read it. See if you agree that the exclusion applies. Ask for professional help from a lawyer or public adjuster if you do not understand the policy language.
Lack of Cooperation
Insurance policies give insures the right to ask for documentation about the cause and value of the loss. Property owners are required, when asked, to sign a proof of loss before a notary public and sit in an examination under oath. These are requirements derived from the policy language endorsed by state law.
What You Should Do. Give the insurance company everything requested that is indeed tied to the cause or amount of loss. That does not mean you disclose records of your divorce or psychological care for a business loss claim. There is little connection between a hail loss and a child custody fight. Consider the requests for information, and when they are related to the loss, produce the documents.
Under Payment
Perhaps the most common dispute between insurance companies and property owners is when the insurance company does recognize an insured loss event (fire, hailstorm, pipe burst, etc.) but offers a low valuation of the damage. People will often refer to this as a lowball adjustment.
What You Should Do. Find a professional in the field, such as a repair contractor, and get a repair quote. If the quote is more than the insurer’s adjustment, and truly reflects market value, send it to the insurer and argue the point. If the insurer disagrees, ask it to produce a licensed, bonded repair contractor that will indeed do all the work for its adjustment, and who will extend a full warranty. If the insurer is unable to do so, the property owner can continue to push the matter to appraisal.
Failure to Timely Report
Insurers will deny a claim when it is reported late. What constitutes late turns on how the notice requirement appears in the policy, and whether the insurer’s ability to investigate the claim was prejudiced. Prejudice in this context means a hindered ability to understand the cause and scope of loss.
What You Should Do. Consider whether the insurer’s ability to investigate a claim is truly compromised. For example, let’s say you report a simple pipe burst claim after six months (that’s never a good idea, but let’s consider this scenario). If three or four items in a basement were damaged beyond repair, and replaced before an insurer could investigate (again, never a good idea), the issue becomes this: how would notice and investigation lower the insurer’s adjustment? If the answer is it would not, the insurer will have a tough time establishing prejudice.
Do not hesitate to email me if you have any questions.