By Béat Koszinowski
Mistake 1: Thinking all insurance is the same
Closer to the truth: All insurance is the same until you have a claim. While the insurance industry has certain standard policy types, most risk is insured via an individually tailored policy. Even within the same insurance company, underwriters use different policy language and add or delete coverage depending on the type of risk. In the insurance world, the customer is considered the risk.
An insurance policy is a legal contract under which the insurance company accepts certain risk from a policy holder and agrees to compensate them for specified, but uncertain future events (or claims). Insurance companies customize policies to offset the risk they are assuming with the insurance premium. While premium cost is often a major factor when buying an insurance policy, it is even more important that buyers understand the language used within each policy and, in turn, the actual coverage it provides.
Mistake 2: Failing to work with experts
Just like doctors and lawyers, insurance agents have distinct specialties and expertise. Ask questions to ensure your agent has sufficient experience to evaluate your business risk and assist you in purchasing proper coverage. An insurance policy is a complex contract; consulting expert insurance agents and attorneys can help you avoid exclusions and endorsements that would place your business at risk. A good agent can also help you avoid wasting premium on the wrong policy.
Mistake 3: Making insurance your only risk management tool
Insurance is a critical part of a comprehensive risk management strategy, but it should not be your only risk management tool. Other key tools include carefully prepared contracts and organizational documents and a safety process that can be effectively implemented by management and employees.
Contracts with third parties should include provisions that allocate risk to the responsible parties, and seek indemnification from third parties whose actions may expose your business to liability. Both your internal business policies and your contracts with others can impact your insurance coverage in the event of a claim, so it is prudent to consult a competent attorney who can evaluate your contracts and operations with your policies in mind.
Mistake 4: Filing an insurance claim and forgetting about it
Often policy holders file a claim directly with the insurance carrier or via their agent without reviewing their insurance policies. When you experience a loss, the best thing to do is review your policies with your agent. There is often more than one that could respond to any given loss, and a review of policies will ensure that each relevant insurer is placed on notice. Filing a claim with the wrong insurance company can cause unnecessary delays, reduce claim payout, and in some cases result in a denial of coverage.
Companies should ask their insurance agent or broker to provide them with a claim filing form that is customized to their type of operations. As an example, a contractor with a fleet of vehicles should have forms for property, equipment, rented equipment, company tools, employee tools, construction site materials/installations, vehicles, employees driving personal vehicles for work, general liability and workers compensation, just to mention some of the more relevant items.
After your company completes the claim filing form, your agent and their claims advocate should start helping you build a solid foundation for your claim. Your agent can even help you gather the information and other documents needed to process your claim.
Mistake 5: Thinking a claim denial is final
Insurance policies are legal contracts that are subject to state law and relevant case law. Since the entire claims process is driven by people, you will find that there are differing opinions on how insurance coverage applies for each unique claim situation. Insurance companies use claims adjusters to help determine insurance coverage and how claims are handled. When handling larger claims, insurance companies typically utilize a more specialized adjuster or team. It is important to get an adjuster that has a lot of experience adjusting your type of claim. Claims often get reassigned based on adjuster experience.
Don’t be surprised when an insurance company hires an independent law firm to find a basis for denying coverage. I recently dealt with a general liability claim where the adjuster denied coverage based on the laws of a different state. When I pointed out the laws of the applicable state, the insurance company paid the claim. It is important to consult with your agent, claims advocate and attorney to discuss your options when dealing with claim and coverage issues. Don’t assume the claims adjuster knows everything or that they are always right. Never take a denial as the final word if you question its validity.
It is not uncommon that liability claims result in complicated litigation including multiple allegations of wrongdoing or damages. You should work closely with your agent during these claims to ensure every aspect of the claim gets the attention it needs. Remember, in some liability claims, the duty to defend the insured could be broader than the actual policy coverage. You may need to hire a skilled attorney to help you navigate this process.
Béat Koszinowski is an insurance professional at Buckner Insurance in Salt Lake City with a specialty focus on commercial and residential construction insurance, bonds and real estate insurance such as homeowners associations, commercial property and apartments.