Businesses often carry multiple forms of insurance. Workers Compensations, business interruption and general liability insurance to name a few. If your business has contents such as office furniture and inventory, you will want to be sure you have insurance in case of a fire, flood, storm or other type of catastrophe. In addition, if you own the building you operate in, you will want to have insurance for the structure. If you are renting, often times, your landlord will require that you purchase insurance and name the landlord as an additional insured in case of a catastrophe.
When catastrophe hits, you rely on your insurance company to make you whole. Unfortunately, insurance is a business and it is in their best interest to make money, which means not paying or paying as little as possible to their insured. For this reason, Louisiana regulates the way insurance companies act and consequences for acting out of line. In Louisiana, all insurance companies are legally required to act in good faith and fair dealing when investigating, adjusting, and settling claims. What happens when your insurance company does not act in good faith?
Louisiana Good Faith and Fair Dealing
Under Louisiana Revised Statute §22:1973, insurance companies are legally required to act in good faith while handling your claim from start to finish. The goal of the law is to expedite the claims process and settle claims quickly.
The law imposes penalties on insurance companies who breach their duties to their insured. A breach can include the following:
- Misrepresenting pertinent facts or policy provisions relating to any coverages at issue;
- Failing to pay a settlement within thirty days after an agreement is reduced to writing;
- Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without the consent of the insured;
- Misleading a claimant as to the applicable prescriptive period;
- Failing to pay the amount of any claim after receipt of satisfactory proof of loss when such failure is arbitrary, capricious, or without probable cause.
The penalties for the above-referenced actions can sometimes total more than the underlying claim.
Satisfactory Proof of Loss
As stated previously, there are necessary actions that the insured take in order to properly trigger their insurance policy. First, an insured must submit a satisfactory proof of loss to its insurer. It is common for an adjuster or attorney to state that a proof of loss is insufficient and the insurer cannot go forward with its claim. Louisiana Courts do not define what exactly amounts to a satisfactory loss. In addition, there are no formal requirements, only that the insurer must have sufficient information to act on the claim. Some courts have held that so long as the insurer obtains sufficient information to act on the claim, there has been a satisfactory proof of loss. Still others hold that a satisfactory proof of loss is that which is sufficient to fully apprise the insurer of the insured’s claim.
Insurance Coverage Exclusions
Why did your insurance company deny your property damage claim? Policy exclusions carve out safe havens for insurers to deny coverage for all sorts of damage and sometimes a policy excludes more than it covers. However, due to the complex nature and circumstances surrounding policy exclusions, the Louisiana Supreme Court has placed the burden of proving that an exclusion applies on the insurer. Takeaway: Do not settle for a general denial of your insurance. Mandate they submit their reason for denial in writing.
Tender v. Full, Final Settlement
After a satisfactory proof of loss has been submitted, assuming the claim exceeds the deductible, the insurance company will issue a payment referred to as a tender. This is a payment of the undisputed amount owed based on the previously submitted documentation and information. However, the claims process is not complete. The insurance company is obligated to compensate the insured for every aspect of the claim that is covered. Satisfactory proofs of loss can be submitted at any point based on a loss and the insurance company has an obligation to evaluate that claim.
If your insurance company has denied your claim, ask why and for written reasons. Also, if your insurance company has issued a payment for your loss and you are not satisfied, confidently dispute your claim. You have a right to choose your own appraiser to adjuster your claim.