BRI News

BLOG | Insurance Claim Declinations Are Not Always Correct – Is Your Insurance Broker Advocating On Your Behalf?

By Ken Fuirst and Jason Schiciano, Levitt-Fuirst Insurance

(TARRYTOWN) If you are fortunate, during the course of your lifetime, neither you, your business, nor any organization with which you are affiliated (e.g. condo association, cooperative, non-profit, etc.) will experience an incident that results in an insurance claim. The reality is that many of us will be involved in an insurance claim at some point.

After a claim is filed with an insurance company, the carrier renders a decision on whether or not the claim is covered, or denied. The carrier looks at the information presented in the claim, including the cause of the claim, and the result.

The claim information is assessed relative to the policy language concerning what is covered, and in particular, what is excluded (every insurance policy has exclusions), to determine if the carrier should provide “coverage” for a claim. For a Property claim, “coverage” could include repair of the damaged property, and reimbursement for net income lost, due to inability to use the property. For a Liability claim, “coverage” could include payments to an attorney to provide a defense against a lawsuit, and payment of a legal judgement against an insured individual or business.

Usually, the correct claim decision is clear and obvious: repairs from a fire or water pipe break are typically covered; a lawsuit relating to a slip-and-fall injury or an auto accident is typically covered. Most claim coverage decisions are simple and indisputable. Occasionally, the circumstances and/or details of a claim are not clear, or subject to interpretation, relative to the language in the insurance policy. Sometimes a carrier incorrectly overlooks certain information. These cases can lead to a carrier’s coverage denial.

A claim denial can result in direct responsibility by the policyholder (individual or business) for all of the expenses related to a claim. In the wake of a claim denial, out-of-pocket expenses could include home or building repair costs, or expenses for legal defense and/or judgement/settlement. These costs can reach tens-of-thousands of dollars, hundreds-of-thousands of dollars, or even more than a million dollars!

Again, the correct claim decision is usually clear and obvious. But what about those claim decisions that fall into a “grey area,” where the decision is subject to interpretation of the events involved, and/or how the policy terms apply to those events? Often times, a carrier will deny coverage for those “grey area” claims. Now what?

A professional insurance broker, with a claims team capable of recognizing “grey area” claims denials, and willing to take the time to craft a carefully-worded appeal, can be the difference between an uninsured, and a claim that is fully paid by the insurance carrier (less deductible, if applicable.)

For example, recent real claim denials that were reversed upon appeal by our office include:

*A unit-owner lawsuit against a condo association alleged that a noisy garage door made the unit uninhabitable, causing loss in rental income. The General Liability carrier denied legal defense to the association, arguing that no property damage (a requirement for coverage) had occurred. Our office argued that the alleged negative effects of the noisy garage did constitute “property damage” (as defined by the policy). The carrier reversed its position, and agreed to defend the association in the lawsuit.

*A Directors and Officers carrier denied to defend a condo Board, asserting that the issue at hand “arose out of prior litigation,” which was excluded by the policy. Our office argued that while the parties were common in the two matters, the subject proceeding was unrelated to the prior litigation and sought different relief, so the exclusion should not apply. The D&O insurance carrier then reversed its decision, and assigned defense counsel to defend the insured.

*A Professional Liability carrier denied defense of a lawsuit alleging that a company had discriminated against sight-impaired people, because its website did not include features that would allow for viewing by the plaintiffs. The carrier’s declination asserted that the claim did not relate to the performance of the insured’s professional services. Our office argued that the claim was covered under the third-party discrimination provisions of the policy, and that the website was part of the insured’s professional services. Upon review, the insurance company withdrew its denial.

*A manufacturer, whose product was damaged during shipping, submitted a claim for the replacement cost of the product under its Property policy. The carrier denied coverage, citing an exclusion relating to “insufficiency or unsuitability of packaging.” Our office reminded the carrier that its own inspection report noted that the packaging “appeared to be adequate,” and that the packaging insufficiency exclusion only applied to storage, not shipping. The carrier reversed its position and paid the claim.

*A Property insurance carrier denied a property damage claim, due to a toilet backup/overflow, stating the backup originated beyond the perimeter of the building (an exclusion), since the plumber allegedly had to snake 100 feet to clear an obstruction in the line. Our office argued that there was no available proof of where the obstruction actually originated in the line, and that the policy language was ambiguous. The carrier reversed its decision and paid the claim.

Insurance claim denial appeals do not always succeed. When they do not, an aggrieved policyholder can file a complaint with the New York State Department of Financial Services Appeals (which oversees insurance industry matters), or file a lawsuit against the insurance carrier. Your insurance broker and/or attorney should be consulted before taking these steps.

An insurance policy is simply a legal contract wherein, in exchange for premium paid, the insurance carrier promises to pay certain claims, strictly in accordance with the policy terms. There is no basis for appealing the vast majority of claim denials, but for those “grey area” denials, an effective appeal can be the difference between the relief and satisfaction of a covered insurance claim, versus the frustration, disappointment, and cost of a declination.

If you experience an insurance claim denial that you think was incorrectly decided, ask your broker to help explain the decision. If warranted, ask your broker to appeal the decision.

Editor’s Note: Levitt-Fuirst Insurance is the Insurance Manager for The Builders Institute (BI)/Building and Realty Institute (BRI) of Westchester and the Mid-Hudson Region. Ken Fuirst and Jason Schiciano are co-presidents of the company. The firm is based in Tarrytown.

This article was featured in the Feb/Mar ’23 issue of IMPACT. View it here

Send me an email when this page has been updated!

"*" indicates required fields