Top Reasons Commercial Insurance Claims are Denied

Property damage to a business can occur at any time. When disaster strikes, owners may find comfort in knowing they have a comprehensive commercial property insurance policy on hand to cover some of the costs. Unfortunately, however, insurance providers deny commercial property damage claims for a variety of reasons. Insurers may also be quick to deny coverage for their own benefit at the expense of their policyholders. Knowing the top reasons why commercial property insurance claims are denied can help business owners understand the claims process and determine their next steps.

Commercial Insurance Claim Denials 

If a business is damaged by a fire, tornado, hail, wind, or other disturbances, a commercial property insurance claim should be filed. Commercial property insurance helps recover after a business’s physical property is damaged, as well as to items located within it that may also be damaged. Commercial property coverage can also help cover the costs associated with the repair or replacement of property that may have been stolen, damaged, or destroyed. 

This type of insurance is legally binding, meaning the insurance provider must process its insured’s claim and pay what is owed for the covered damages promptly. Unfortunately, these claims have the potential to be wrongly denied by insurance carriers. This can put business owners in a tough position, as they may not be able to run their business properly or at all due to the damage. Some of the top reasons why commercial insurance claims are denied include:

Delay in filing the claim

When property damage occurs, business owners may be tempted to wait to file an insurance claim for a variety of reasons. Some owners may want to see if they can complete the repairs themselves, while others may be more concerned with how filing a claim could impact their insurance rates. Regardless, commercial property owners should not wait too long to file a claim. 

While most policies state that the insured should notify their insurance company promptly of a loss, the definition of “prompt” can be vague. Despite this ambiguity, policyholders should file a property damage claim as soon as possible because of other time constraints that must be adhered to after a claim is filed. Insureds can run the risk of their claim being denied if they report the loss so late that the insurance company will be unable to complete an appropriate investigation.

Insufficient documentation of the damage 

After a claim has been filed, one of the policyholder’s responsibilities is to prove the damages and/or losses to the insurance company. This can include photo and video evidence of the damage as well as any corresponding documentation that supports the claim. Insufficient documentation of the damage to the property or a lack of inventory of the valuable items on or in the property before the loss can quickly lead to an insurance claim being denied.

Damage excluded from coverage 

Just as with most insurance policies, commercial property insurance comes with its own set of coverage exclusions. This is because no insurance policy will cover the entire property and everything it contains, nor will it provide coverage against every event or source of damage. While each policy is different, most often damage resulting from events like earthquakes, floods, and other more nuanced risks are not covered under a standard commercial policy. Unfortunately, many policyholders are unaware that to cover these events, they will need to purchase a separate policy. Without this additional, specific coverage, if the source of property damage is not covered under the existing policy, the claim will be denied.

Not mitigating further damage 

Immediately after a commercial property is damaged, it is pertinent that property owners attempt to mitigate further damage. This is one of the key requirements in property damage policies; however, this does not mean the insured should make any permanent repairs to the property. On the contrary, they must make arrangements to ensure the property doesn’t sustain additional damage while the claim is investigated. 

Mitigating damage can include installing tarps over damaged roofs to protect the interior of the property or blocking off the damaged areas of the property to help contain it. If the policyholder makes no attempts at preventing further damage to the property, the insurance provider can flat-out deny the claim.

Not maintaining the property 

Commercial property owners are required to keep up with regular, expected maintenance and repairs to their properties. While insurance protects against any unexpected damage, an insurer expects the property owner to prevent wear and tear-related damage. Wear and tear exclusions keep insurers from being held liable for damage that is foreseen and preventable.

Insurance Coverage Attorneys 

Even if a policyholder follows all of the requirements necessary in order to avoid having a commercial property claim denied, insurance providers can still utilize bad faith tactics to avoid paying a claim. When this happens, hiring experienced legal counsel can make a big difference in the success of a claim. At Raizner Slania, we work to aggressively ensure your claim is properly investigated and that you get the money you are owed by the insurance company. If your property damage claim has been wrongfully denied, delayed, or underpaid, contact our office today to see how we can help.

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