The following information is copied from a news release from the Missouri Department of Insurance in the interest of Missouri property owners and policyholders who follow this blog.

Earthquake Insurance for New Madrid Seismic Zone Residents Continues to be a Complex Problem

Missouri Department of Commerce and Insurance encourages residents to “Get Ready and Have a Plan”

Media Contact: Lori Croy 
Email: news@dci.mo.gov
Phone: (573) 751-2562

The Imperative of Accuracy: A Comprehensive Analysis on the Need for Precision in Business Owners’ Property Insurance Applications

The importance of property insurance for business owners cannot be overstated. It serves as a financial safety net, protecting against unforeseen circumstances such as natural disasters, accidents, or theft. However, the efficacy of this safety net relies heavily on the accuracy of the information provided by business owners when preparing their applications for property insurance coverage. This essay explores the critical need for accuracy in these applications, examining the repercussions of inaccuracies and emphasizing the responsibilities of business owners in ensuring a comprehensive and truthful representation of their properties.

The Role of Property Insurance in Business

Property insurance plays a pivotal role in risk management for businesses. It provides financial protection by covering the costs associated with property damage or loss. For business owners, the ability to rebound from an unexpected event often hinges on the effectiveness of their insurance coverage. Whether it be a fire, flood, or burglary, the financial impact of such incidents can be devastating without the proper insurance safeguards in place.

Accuracy in Applications: Foundation for Effective Coverage

When business owners apply for property insurance, accuracy becomes the cornerstone of a robust and effective coverage plan. Insurance companies rely on the information provided by applicants to assess risk and determine appropriate premiums. Any inaccuracies in the application can lead to underinsurance, disputes during claims processing, or even outright denial of claims. Thus, the accuracy of the information becomes the foundation upon which the entire insurance relationship is built.

Repercussions of Inaccuracies

1. Underinsurance: Inaccurate information on property values, inventory, or equipment can lead to underinsurance. Underestimating the value of assets leaves a business vulnerable to financial strain in the event of a claim. Insufficient coverage may result in the business owner having to bear a significant portion of the repair or replacement costs, potentially jeopardizing the viability of the business itself.
2. Claims Disputes: Inaccuracies in the application may lead to disputes during the claims process. Insurance companies meticulously investigate claims, and any disparities between the stated information and the actual circumstances can trigger disagreements. This not only prolongs the settlement process but may also result in the denial of claims, leaving the business owner without the expected financial support.
3. Premium Adjustments: If inaccuracies are discovered after the issuance of the policy, insurance companies may adjust the premiums accordingly. This can lead to unexpected financial burdens for the business owner, affecting the budgetary planning and overall financial health of the business.

Responsibility of Business Owners

1. Thorough Property Assessment: Business owners must conduct a comprehensive assessment of their properties before applying for insurance coverage. This includes accurately valuing buildings, inventory, equipment, and any other assets. Employing professionals, such as appraisers or risk management consultants, can assist in ensuring precise valuations.
2. Regular Updates: Businesses evolve over time. Changes in inventory, equipment, or property modifications can impact the accuracy of the initial insurance application. Business owners should regularly update their insurance providers with any changes to ensure that coverage remains adequate and reflective of the current state of the business.
3. Transparency and Disclosure: Transparent and honest communication with insurance providers is essential. Business owners should disclose all relevant information, even if it may increase premiums. Concealing information or providing inaccurate details can have severe consequences in the event of a claim.
4. Understanding Policy Terms: Business owners need to have a clear understanding of the terms and conditions outlined in their insurance policies. Misinterpretation or lack of awareness regarding policy details can contribute to unintentional inaccuracies in applications. Seeking clarification from insurance professionals ensures that business owners make informed decisions when applying for coverage.

Conclusion

In conclusion, the accuracy of information provided by business owners when preparing applications for property insurance coverage is paramount. It forms the basis for a robust risk management strategy, ensuring that businesses are adequately protected against unforeseen events.

The repercussions of inaccuracies, ranging from underinsurance to claims disputes, highlight the need for meticulous attention to detail in the application process.

Business owners bear the responsibility of conducting thorough property assessments, regularly updating information, practicing transparency, and understanding policy terms. By fulfilling these responsibilities, they contribute not only to the effectiveness of their insurance coverage but also to the overall resilience and sustainability of their businesses.

In a world where uncertainties are inevitable, accurate property insurance applications stand as a proactive measure, safeguarding businesses and providing a financial safety net when it is needed the most.

Have you wondered what bad faith on the part of an insurance company looks like?  Has this, or something similar to this, happened to you?

I want to share a call from a prospective client I received an hour before writing this post.

After consulting with several professionals who confirmed his roof damage, he filed a hail claim with his insurance company. They first sent an Independent Adjuster to his home to inspect his roof.  The adjuster confirmed the damage and reported to the insurance provider that the roof should be replaced.

Instead of paying the claim, the insurance provider sent a second adjuster, a 40-year seasoned desk adjuster employed by their company, to inspect the property physically.  After his inspection, he informed the insured homeowner that he agreed with the first inspector and would be submitting his request for a complete roof replacement.

A few weeks later, instead of paying for the damage confirmed by two different adjusters hired by them, a member of the insurance carrier’s management team emailed the insured homeowner that he was sending a third adjuster.  Another contracted Independent Adjuster was paid to inspect the damaged roof this time. He checked the same roof and agreed with the first two adjusters that the roof needed to be replaced, and he informed the policyholder and insurance provider accordingly.

Instead of paying for the damage that three adjusters reported to them as being covered under the insurance policy, the giant insurance provider we all know from their numerous television commercials is now sending their “engineer” to inspect the damage a fourth time and report back to them.

“I wonder what the insurance company’s hand-picked engineer will say,” said no one, ever.

Sometimes, I feel compelled to pay certain insurance carriers for all the marketing they provide for my services to their customers.  

Know how to make a legitimate insurance claim before you present it to your insurance company or, as an alternative, contact an attorney or public adjuster to advise you.  “No” is not always the final answer to your insurance claim.

(As of 7/20/2023)

MO Rev Stat § 375.1007 

375.1007.  Improper claims practices. — Any of the following acts by an insurer, if committed in violation of section 375.1005, constitutes an improper claims practice:

  (1)  Misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;

  (2)  Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;

  (3)  Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under its policies;

  (4)  Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;

  (5)  Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them;

  (6)  Refusing to pay claims without conducting a reasonable investigation;

  (7)  Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated to the insurer;

  (8)  Attempting to settle a claim for less than the amount to which a reasonable person would believe the insured or beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application;

  (9)  Attempting to settle claims on the basis of an application which was materially altered without notice to, or knowledge or consent of, the insured;

  (10)  Making a claims payment to an insured or beneficiary without indicating the coverage under which each payment is being made;

  (11)  Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;

  (12)  Failing in the case of claims denial or offers of a compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions;

  (13)  Failing to provide forms necessary to present claims within fifteen calendar days of a request with reasonable explanations regarding their use;

  (14)  Failing to adopt and implement reasonable standards to assure that the repairs of a repairer owned by or required to be used by the insurer are performed in a workmanlike manner;

  (15)  Failing to promptly settle claims where liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

If you have additional questions, contact me.

A leak in my roof has stained my ceiling and I am afraid that it needs to be replaced.  Should I file an insurance claim for my leaky roof?

The short answer is “No”.  Before deciding to file a claim for roof damage, a homeowner must gather more facts than just the evidence of a leak.

The first question that must be answered is ‘what is the source of the leak and what caused it?’   Did the leak originate from deteriorated flashing at the chimney or other maintenance related issue?  If so, your insurance policy excludes coverage for wear and tear and other deferred maintenance issues.  Knowing and being able to prove that the point of entry for the moisture was caused by a sudden and accidental insured event (lightning, wind, hail, falling tree limb, ice damming, etc.) should be the first step in deciding whether to file an insurance claim for roof damage.

The second question that must be answered is ‘when did the damage occur?’  Your insurance policy has a date on which coverage begins and a date for when coverage ends.  Did the damage during the period of insurance coverage?

The third question that must be answered is ‘does the cost to restore my roof to its condition prior to the event that damaged it exceed my deductible, and by how much?’  Not all insurance policies provide for a full roof replacement under all circumstances.  What does your policy cover and how much deductible will be applied before the insurance begins to pay?  A $350,000 insurance policy with a 1% deductible will begin to pay for covered damage for amounts that exceed $3,500.  A roof repair that will cost $3,000, while covered by the policy, would not result in a payment.  A $5,000 repair or partial replacement would result in a payment from the insurance company of $1,5000, less depreciation when applicable.

When you know what caused the leak AND when you know that the damage that caused the leak is covered under your policy AND you know that the event that caused the leak occurred during the period which your insurance company provided coverage AND you know that the amount your insurance provider will pay you (along with the possibility of an increase in your premium rate) exceeds your costs of repair at your own expense … it is probably worthwhile to file an insurance claim.

Proving that your loss is covered is your responsibility and not your insurance provider’s.  Gather your facts before you make your call.  If you need help, call a professional for assistance.

Will a public adjuster get me extra money from my claim? The short answer is “no”.  You are not entitled to receive any more from your insurance carrier than what is required to restore you to your condition prior to your loss, and a public adjuster cannot obtain more money than you are entitled to under your contract with your insurance provider.

What the public adjuster does, however, is represent your claim to your insurance company to ensure that you correctly claim all that you are entitled to receive.  This is something that most policyholders are not able to do on their own and, because they cannot, are vulnerable to being exploited by their insurance company’s duty to show a profit to its stockholders.

It is unknown to the typical policyholder that it is their burden to prove to the insurance company (a) they have a covered loss and (b) the actual cost to restore them to their pre-loss condition.  Because they do not know this, most will notify their insurance company of their loss and wait for the insurance adjuster to tell them if they are covered and how much they are willing to pay. 

On the other hand, your public adjuster presents to the insurance company proof of your covered loss and the amount of money you will require to recover from the covered loss.  He is not “asking” – he’s proving the coverage, the damage, and the costs to restore you to your pre-loss condition.

The difference between allowing the insurance company’s adjuster to find the proof of a covered loss on his own and to “estimate” the amount of money necessary to restore it – and the public adjuster’s evidence of the loss and presentation of the actual damages – can and has resulted in differences amounting to hundreds of thousands of dollars in a single claim.

These differences in settlements derived from using a public adjuster are not “extra money”; instead, it is the exact amount of money that the policyholder requires and is entitled to restore them to their pre-loss condition.