Running a business (or nonprofit) comes fraught with a host of stressors. Supply disruptions, marketing issues, cash flow, and regulatory requirements are just some of those. Others include the legal risks of not only consumer or client complaints related to your goods or services, but property damage resulting from unforeseeable natural or human causes.
Commercial property insurance exists to help alleviate those risks that are most out of your control: storms, sudden collapses, vandalism, theft, explosions, water damage from failing equipment, cyber attacks, and more. Having a commercial property insurance policy in place is supposed to relieve the burden and stress of those types of events and the associated business interruption that is sure to follow.
When the unexpected occurs, your insurance should be there to provide peace of mind. Unfortunately, not all insurance companies follow through on their obligations.
What should I do after suffering property loss?
In the event of property damage, the first thing to do is immediately stop it at its source if possible – most often, this can be done with something like water damage and shutting off the main, or securing a broken door to prevent theft.
Next, call your insurance company to notify them of the loss and start working on the best way to arrange for temporary securing and immediate needs on repair. Often an insurance company can provide recommendations for remediation companies but do not feel constrained to use only what they suggest unless you are told it is a mandatory requirement of your policy.
After notifying the insurance company, it is important to document the loss as much as possible. Take photos and videos from all different angles in which it is safe to do so. You want to have your own record but also document the site as the circumstances could change even before the insurance company is able to send out an adjuster or other professional. Detailing the damage is your best protection at this point. To the extent you have disruptions to your business, it is also important to take steps to document all expenses and losses there as well.
Lastly, it is necessary to cooperate with the insurance company while it investigates and after it hopefully accepts the claim to move on to repairs, as failing to do so can sometimes impair your rights under the contract. But always keep in mind that not all insurance companies or adjusters are looking out for your best interests. Do not be hesitant to question what you are told and ask for things to be put in writing.
What are my options if denied or the payout is too low?
If your claim for property damage was denied or unfairly adjusted, make sure to get an explanation in writing as it must be provided by law. Then check to make sure any losses not covered do not actually fall within any other policies held by your company. There are many different types of business insurance coverages that sometimes provide overlapping or even unexpected benefits. It never hurts to call an insurance company even if you think their policy does not address the loss and ask, as there may be coverages you were not aware of and the insurance representative is supposed to help in fairly determining coverage.
Otherwise, there are two main options available to you upon receiving a denial whether in whole or part: respond to the insurance company to seek appeal or pursue legal action.
Since legal proceedings can be expensive and time-consuming, it’s usually a good idea to start by trying to work with the insurance company by its own appeal procedures. You can do that with or without the assistance of an attorney.
Submit an Appeal
Aside from obvious exclusions, the reasons why a claim gets denied are usually open to interpretation. This is especially true with complex property losses that can have more than one possible cause. Once you know in writing why your claim was denied, the first action you can take is crafting a response to the insurance company that seeks an appeal.
To make a convincing appeal, start by carefully reviewing the terms of your commercial property policy so you can present your best argument for why the damage should be covered. Directly addressing the reason for denial is usually necessary.
Since the claim was denied once, it can help also to present new information for the appeal. Perhaps there are more details about the damages you did not know initially or you have since hired your own expert to review the situation. Presenting that information while making an argument for why it should fall under the terms of the policy can increase your chances of an accepted appeal.
At this point, enlisting an attorney to advise you or to make the appeal on your behalf can make a huge difference. An experienced property insurance attorney is accustomed to dealing with claim denials and knows the types of information that have the best chances of getting an insurance company to change its mind without the need to threaten litigation.
If, however, the insurance company already had all the information it needed to make a decision in your favor, you may very well have a claim for bad faith and increased damages. An experienced litigation attorney can help you determine that as well, and move forward while preserving all your rights to obtain the compensation you deserve by law.
Take Legal Action
If your appeal is also denied, your final option is to pursue a lawsuit in civil court. This course of action is only worth the time and expense if there is a valid claim though. An insurance litigator’s expertise is essential at this time.
If you and your legal counsel feel you have good grounds for proving the damage should have been covered by your policy, or that the claim was intentionally paid at a lower amount than justified by the circumstances, the key to success is to craft a strong demand letter that satisfies all the statutory requirements in Texas.
The most common type of lawsuit in this situation is for a bad faith denial. The argument is two-pronged. First, you need to show that the loss is covered by the policy’s terms and, second, that the insurance company either failed to investigate properly, misled you about the policy or facts of the claims, or otherwise took unfair actions to avoid compensating you as required by the policy.
Wright Commercial Litigation has significant experience helping small business and nonprofit organizations (including churches and others) obtain the compensation to which they are entitled under a commercial property insurance policy, as well as additional damages provided by law to prevent and deter bad faith or a failure to promptly pay a claim in full. Contact the firm for an initial consultation and see if it can assist you on a contingency or hybrid fee basis.