Be Aware of Possible Claim Resolution Complications

March 22, 2024

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Resolving claims is a critical part of claims handling. Understanding any potential claim resolution complications can assist in closing claims quickly and containing costs.

The below highlights some common resolution problems to be aware of:

Check the definitions and limits and be sure you understand what the insurance policy includes. Property insurance policies are either named perils or “all risk” contracts. If it is a named perils policy, you are insured for only the perils specified. However, an “all risk” policy covers all perils unless they are specifically excluded. Review exclusions to ensure they do not exclude what you are intending to cover. 

Values and locations should be reported as completely and accurately as possible at each renewal. Your policies may have specific requirements for reporting locations and specifically requesting coverage. The coverage will be questionable if the loss occurs where values are under-reported or in an unreported location. Values should not be the decisive factor in setting policy limits. Using the largest location’s value as the policy limit ignores coverages for items with no reported values that are part of the covered limit (such as business interruption interdependency, debris removal, and demolition).

You may think the policy is crystal clear at explaining what is protected, but after a loss, sometimes the interpretation of that language gets muddy. Whereas some losses are resolved easily, some losses create adjustment disputes where you need to aggressively pursue the most favorable coverage interpretation. Examples include:

  • Earthquake and concurrent causation
  • Hurricane losses with accompanying storm surge and surface water
  • Business interruption versus idle periods
  • Pollutants and contaminants
  • Asbestos removal
  • Boiler and fire box explosions
  • Design defects
  • Land versus land improvements 

It’s not uncommon for local or national building codes to change after a building is constructed. The building will be exempt from application of the code until a loss occurs and the building must be reconstructed. Keep in mind that compliance with the codes may increase costs above those to replace with like kind and quality. Examples of these building code improvements include:

  • Earthquake upgrades
  • Adding fire protection
  • Changes in electrical or plumbing systems
  • Sustainability requirements
  • Handicapped access

Some policies cover this increased cost of construction and accompanying business interruption, while others need to be endorsed. Awareness of policy requirements and communication with the adjuster are vital to prevent problems. 

Laws governing land use have become more restrictive year after year resulting in a significant effect on reconstruction and recovery. Laws regulating the replacement of buildings after a loss may require extra green space (i.e. trees), additional parking, and height limits. If the building cannot be rebuilt to the same square footage as before the loss, not only has the property damage claim been reduced, but this reduction in usable, rentable, productive space may cause a time element loss that lasts forever. Adjusting these losses is very problematic. Although the policy may allow rebuilding at another site, location may be critical to operation.

Understanding these possible property insurance claim resolution complications can assist with a positive outcome with the adjuster. Start the conversation today. Contact TSIB and speak with one of our knowledgeable Risk Advisors. 

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TSIB’s Risk Consultants are currently servicing the following locations:
East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA
Texas: Austin, San Antonio, Houston, Dallas
California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County

Topics: Claims

Written by The TSIB Team

All Authors and TSIB