Rioters smashed your storefront windows and looted your store. Fire gutted your newly framed construction project. A daredevil ignored your posted warning signs, used your fence as a trapeze, fell – and is suing you.
Now is not the time to be reading your insurance policy for the first time. Yet surprisingly, that’s exactly what happens in many companies, jeopardizing their ability to recoup their losses.
The problem usually isn’t about discovering whether your insurance covers the particular “peril” involved. Fire, water damage or any number of mishaps caused by employees, customers or nature can be and usually are covered – if you’ve selected appropriate insurance in the first place. Where businesses often run into trouble is when they have not paid attention to the fine print – policy exclusions or, most likely, stipulations they’re required to meet.
Every policy is different, and there are numerous potential exclusions that can cause a company to lose its coverage – so you must know which ones are in your policy; ideally, before you ever need to make a claim.
Some best practices to protect and ensure proper insurance coverage include:
Before a loss
Appoint one person in your organization to be responsible for insurance coverage. This includes ensuring appropriate coverage, placing and maintaining coverage, ensuring your company is complying with stipulations and dealing with losses and claims.
Give that person access to professional advice. This includes brokers for the insurance products relevant to the risks of your business, so your company understands what is available and the limitations of what you are buying. For claims, that means access to legal advice for coverage issues that may arise, gaps in coverage and denials of coverage.
Read and keep all your policies. Don’t throw old policies away. Claims can trigger coverage under occurrence-based liability policies that are 50 years old.
In the event of a loss
Report claims or losses immediately. In some types of policies, not reporting in time can result in no coverage. Delays in reporting can bring suspicion to your claim.
Review your coverage and your loss. Don’t settle, defend, respond to the claim, put in a proof of loss or meet with the adjuster until you have a good understanding of what the potential coverage issues may be. If you know what the pitfalls are, you’ll be able to put your best foot forward.
Comply with your duties as policyholder. Reporting your claims and losses is the first step. Co-operating with the insurer so it can cover your loss is the second. This does not mean admitting liability. Don’t make voluntary or any payments without the insurer’s consent. This may be important in protecting your insurance company’s right to take action against a third-party.
Don’t sign non-waiver agreements or respond to reservation of rights letters without getting legal advice. Most policies will cover independent counsel to review any agreements proposed – you’d be wise do so. Otherwise, you may be giving the insurer rights it doesn’t have under the policy. If the insurer has issues with the claim or coverage, invite the insurer to set them out before you so you can address them.
Question denials of coverage. Don’t take no for an answer unless it’s absolutely clear. Ask questions and get reasons for their decision. Challenge the insurer. It must provide much more evidence to deny your claim than you have to provide to have it covered.
Don’t agree to an allocation of defence costs up front. The insurer is required to pay all defence costs unless it can prove it’s related “solely and undeniably” to an uncovered claim.
For substantial property losses, hire experts. Consider retaining experts to assist in submitting the claim; the costs are often covered by the policy. They will also help ensure that you are tracking and claiming, where applicable, soft costs such as delayed openings and business interruption. Depending on the situation, they may discover the same loss can be claimable under both a liability and property policy.
Bottom line: Read your policy; limit your risk by understanding and meeting the stipulations within it. And – if an accident or loss occurs – make sure you have a good understanding of what the potential coverage issues might be and how to protect yourself and your business. •
