A critical step in a property insurance claim is the investigation undertaken by the insurer to gather information about the claim. Insurers generally have obligations and rights to conduct a prompt investigation of claimed losses, but policyholders often do not fully understand the investigation process or coverage issues it raises. They may not review the policy requirements to understand their obligations with respect to the claims process. This post addresses insurance coverage considerations when the insurer wishes to investigate your claim for loss under a property policy.
Of course, you can’t change the unfortunate fact that you’re facing a loss, but there are certain steps that you can take before, during and after an investigation to put yourself in the best possible position for coverage under your policy.
Report your loss timely and strategically.
A first step in the insurance recovery process is providing notice to your insurer of your claim. The policy will typically include reporting requirements for notice and Proof of Loss. A Proof of Loss is generally a notarized, sworn form statement from the insured to the insurer concerning the cause and amount of damage. Accuracy is essential: any inaccuracy can result in complications in processing your claim, denial of coverage, or even litigation. Note that the policy or state law may impose a fairly short submission deadline, and in some states failure to timely submit a Proof of Loss can result in complete denial of the claim.
It’s crucial to be careful in preparing a Proof of Loss. Review all provisions of your insurance policy and all available coverage before the proof of loss is prepared. Make sure to accurately present your claim in a way that demonstrates and maximizes how coverage is available for your losses. For example, categorize your losses into as many different coverages as possible. Most property policies generally cover property damage and business interruption, but also include additional coverages that may provide additional limits for specific types of losses, such as debris removal or service interruption. Think of it like this: if you have several buckets available to pour water into but you pour all of your water into only one, more water will overflow and be lost than if you poured water into all of them. In other words, you may lose out on coverage if you focus on the principal coverage and don’t identify losses that may be covered under your additional coverages. Your Proof of Loss should include a description of your losses, and may include supporting documentation. Insurance adjusters may come and inspect the property to get an estimate of the damage and cost to repair or rebuild. It’s often also a good idea to get your own estimates.
Cooperate with your insurer’s reasonable requests.
In addition to an inspection of your property, the insurer will likely request additional information. Policies typically contain a duty to cooperate in the event of a loss. This means that you should comply with the insurer’s reasonable requests for information, including examinations under oath, property inspections, and the production of documents and records. The requests need to be related to your claimed loss and otherwise reasonable to determine coverage or valuation under the policy. For example, if the policy values losses based on your organization’s business experience prior to the loss period, then information about earning after the loss period may not be a reasonable request. Also note that you don’t have to volunteer information or documentation that the insurer has not affirmatively requested—it’s only if the insurer asks you for it. But on the same token, don’t try to influence the outcome by artfully withholding information: that can get you into hot water, and it’s wrong.
Mitigate damages if possible.
Once you’ve documented your losses, if there are steps that you can take to prevent the property damage from getting worse, then you should do so. Insureds typically have a duty to mitigate damages under both cooperation clauses contained in their policy or applicable common law. For example, you should at least temporarily fix any openings in your property from wind damage after a storm so the property does not sustain additional damage. Likewise, if you are suffering a covered interruption of business operations, assess whether you can temporarily conduct some or all interrupted operations at another facility. Your policy may even pay the cost of ramping up elsewhere to mitigate on-site losses.
Be sure to keep all associated records of your efforts to mitigate, so that you can be included in your claim. After a loss, mitigating damages, whenever possible, is always the recommended course of action.
Understanding the policy’s requirements and your obligations as an insured in the claim investigation process will help you position your claim under a property policy for recovery. If your insurer denies coverage following its investigation even after you’ve taken all these steps, consider speaking with coverage counsel about your issues.