Keep away from Declare Denials: Key Policyholder Duties After a Loss

All insurance coverage insurance policies embrace a piece putting particular obligations and obligations on policyholders to behave in a sure approach earlier than entitling them to coverage advantages for what must be a coated loss. If policyholders ignore such obligations, insurance coverage corporations can attempt to delay fee or, in additional excessive circumstances, even deny fee altogether for what would in any other case be a coated loss had the policyholder solely complied with their obligations beneath the coverage.

Most insurance coverage insurance policies embrace a piece titled ‘Duties after Loss’ that goes over the entire policyholder’s particular duties they have to adjust to after a loss. Typical duties for property claims embrace:

• Promptly notifying the insurance coverage firm of the loss;
• Cooperating with the insurance coverage firm in its investigation of the declare, and;
• Defending/preserving the insured property after a loss.

Make sure to learn the particular language of your coverage to completely perceive your full record of obligations, as these can differ between states, between insurance coverage corporations, and between insurance policies. Don’t fall sufferer to the concept that a policyholder’s duties after a loss stay stagnant between coverage renewals both. Insurance coverage corporations can replace these duties from yr to yr, so each policyholder ought to assessment their ‘duties after a loss’ part every time they obtain a brand new coverage or renewal.

Why These Duties Matter

In the end, insurance coverage corporations place these post-loss obligations/duties on the policyholder to guard themselves. Insurance coverage corporations can use a policyholder’s non-compliance with a post-loss obligation as a motive to delay fee of a declare or in additional excessive instances, even deny the declare altogether. In impact, a policyholder’s compliance with a post-loss obligation is required earlier than a policyholder may even obtain fee for a loss.

Materials and Substantial Drawback to the Insurer

To argue a policyholder has voided protection for non-compliance with a post-loss obligation, a provider should present that the policyholder’s violation resulted in a “materials and substantial drawback to the insurer.” ¹ Such a “deprived’ evaluation can embrace “whether or not the insurer has been in a position to full an inexpensive investigation with regard as to whether the insured’s declare is legitimate. If the insured’s refusal to cooperate prevents the insurer from finishing such an inexpensive investigation, prejudice must be discovered to exist. Particularly, it has been held that the insurer can deny protection, following an insured’s refusal to offer paperwork moderately requested by the insurer, on the idea that the insurer has been prejudiced as a result of the insured’s refusal prejudices the insurer by placing the insurer within the untenable place of both denying protection or paying the declare with out the means to research its validity.” ²

The Obligation to Cooperate

Amongst a policyholder’s post-lost duties/obligations, the obligation to cooperate with the insurance coverage provider tends to be one of the crucial vital. “The aim of a cooperation clause is to guard the insurer in its protection of claims by obligating the insured to not take any motion deliberately and intentionally that will have a considerable, adversarial impact on the insurer’s protection, settlement, or different dealing with of the declare.” ³ This implies a policyholder shouldn’t do something that hurts or stops the insurance coverage provider’s potential to research an energetic declare.

In my state of Colorado, courts implement the requirement that an insured should cooperate within the claims investigation by the provider as a situation precedent to protection beneath the insurance coverage coverage. ⁴ Whether or not a policyholder has sufficiently ‘cooperated’ with the provider beneath the coverage is a query of reality for the jury to determine. ⁵ In some instances, it’s attainable to excuse a policyholder for a supposed violation of the cooperation clause if it’s proven that the policyholder’s failure “was on account of some mistake and there was no train of unhealthy religion on [the policyholder’s] half.” ⁶ In the end, it’s higher and extra easy for a policyholder to not put themselves in a state of affairs in any respect the place such a argument would should be introduced.

Actual World Instance

In a 2024 United States District of Colorado case, policyholder plaintiffs have been in a position to overcome a protection movement for abstract judgment on a failure to cooperate argument by arguing substantial compliance with the coverage. ⁷ In that first-party property insurance coverage case, the provider repeatedly requested the policyholders present particular info on a number of home equipment inside the dwelling that have been alleged to be broken in a loss. It’s undisputed that the policyholders by no means offered the requested supplies to the provider. Nevertheless, the policyholder plaintiffs argued they considerably complied (i.e., cooperated) with the provider’s request by offering what data they did have on the particular home equipment – together with estimates, footage, and reviews – although this was not the particular supplies the provider requested. The policyholder plaintiffs additionally argued that the provider had sources out there to it to acquire the particular info it wished with out getting in from the policyholder plaintiffs instantly.

What’s extra, the provider introduced no proof that it ever knowledgeable the policyholder plaintiffs of the potential consequence of denying protection outright for the loss if the policyholder plaintiffs failed to offer the requested info. As an alternative, the provider solely introduced common proof of it being ‘deprived’ by the data not being offered quite than it being ‘materially and considerably deprived.’ Due to this, the courtroom agreed with the policyholder plaintiffs that they introduced “proof that would lead an inexpensive jury to conclude they complied with the Coverage’s obligation to offer documentation.” ⁸

Ultimate Ideas

What’s clear is that understanding a policyholder’s obligations after a loss might be complicated. The very best follow is for policyholders to do what they’ll to adjust to an insurance coverage firm’s request throughout its investigation of a declare. In any other case, a policyholder dangers inadvertently voiding protection beneath the coverage. In case you are unsure what you should do after experiencing a loss, take into account speaking to an lawyer who’s skilled in property insurance coverage regulation. Insurance coverage is already sophisticated. By figuring out your rights, your choices, and your obligations when a loss happens, you may assist guarantee a easy course of when making a declare and belief that you’ll not be taking any motion that would inadvertently harm your declare within the course of.

¹ State Farm Mut. Auto. Ins. Co. v. Secrist, 33 P.3d 1272, 1275 (Colo. App. 2001).
² Walker v. State Farm Hearth & Cas. Co., No. 16-CV-00118, 2017 WL 1386341, at *4 (D. Colo. Feb. 23, 2017).
³ Secrist, at 1275 (citing Am. Policyholder’s Ins. Co. v. Baker, 119 N.H. 958, 409 A.second 1346 (1979)).
⁴ Todd v. USAA Gen. Indem. Co., 713 F. Supp. 3d 1088, 1102 (D. Colo. 2024).
⁵ Todd, at 1105.
⁶ Farmers Auto. Inter-Ins. Exch. v. Konugres, 119 Colo. 268, 276, 202 P.second 959, 963 (1949).
⁷ Todd, at 1102.
⁸ Id.