Insurance coverage

It’s not you, it’s them: Dealing with insurance coverage denials

If your business has an emergency response plan, and it probably does, filing an insurance claim should be included in that plan. But what if your insurer prolongs the thought process by making ongoing and costly inquiries without determining coverage? Or decide to deny coverage under one clause of the policy, but accept coverage under another? Or refuse coverage outright? Insureds must be prepared to comply with policy obligations (which may vary depending on the law of the controlling state), such as sharing relevant information and documents or participating in arbitration or mediation before suing the insurer, but also understanding the responsibilities of insurers to policyholders in the event of a claim.

Typical tasks for insurers include:

  • acknowledgment of receipt of the complaint;
  • duty to investigate;
  • right and duty to defend;
  • right to a defense lawyer; and
  • right to settle.

When evaluating a denial of coverage, policyholders should carefully review the entire policy, including endorsements and schedules, to determine their options. Many policies contain endorsements or modifications that may alter the terms of the original policy and the extent of existing coverage that the insurer may have overlooked.

Other best practices to include as part of the “plan” include having a system in place to document relevant information and costs incurred, especially those incurred immediately afterwards, before the insurer can assess the loss. , and having a pre-determined list of contingency suppliers who can help restore business operations as quickly as possible. A written record of communications with the insurer is also important for the insurance claim, but also if it is necessary to take legal action for coverage. For example, the insurer may assert a late notification defense that excludes coverage. In this case, documentation of the policyholder’s claim report may be necessary.

Policyholders should also understand which stakeholders, internal and external, should be included in the claims process. These may include Named Insured Entities, where the claim is brought by an additional Insured or Affiliate, brokers and coverage attorneys who have specialist knowledge of insurance claims and disputes, and can assist navigate the claims process. Among other things, an experienced coverage attorney can help you ensure compliance with policy terms and other requirements, obtain prompt payment and other policy benefits that may be due, and protect your rights should the insurer refuse to fully accept the claimed loss.