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When is an insurance delay too long?

On Behalf of | May 26, 2023 | Insurance Law

Timing is crucial when recovering from a natural disaster that damages your home or business. You want repairs completed before the next severe weather event hits. While you’re free to hire repair crews as soon as you want to, if you want your insurance carrier to pay for the repairs, you will need to submit a claim, cooperate with the insurer’s reasonable investigation, and wait to be paid what the insurer decides is the reasonable cost of the repairs.

Why do insurers delay?

  • They can’t pay: If a significant disaster, such as a wildfire or flooding, damages multiple homes in an area, you can expect your insurer to be neck-deep in claims. It might take some time to pay all policyholders affected, either because there are too many to handle all at once, or your insurer doesn’t have enough qualified adjusters available.
  • Investigation:  By law, insurers are required to conduct a thorough, fair and objective investigation of every claim. This requires obtaining information needed to determine if the claim is covered, which usually means determining whether the loss was caused by a covered or non-covered cause. The investigation will also include determining the scope of the damage and, depending on the type of loss, either the actual cash value of what was lost or stolen or the cost of repairs or replacement.  .
  • Disputes: Your insurer can dispute your claim, delaying payment. They might disagree with the extent of the damages you claim or argue that your claim falls under their policy exclusions.
  • They’re still deciding: In California, your insurer must accept or deny your claim within 40 calendar days from the time you send proof of your claim. If more time is required, the insurer can extend that time by sending you a letter stating when they expect to make a decision and what additional information they need. They must send you such a letter every 30 days thereafter until they’ve obtained the necessary information and made their decision.

How long should I wait for my insurer?

if they have sent you a letter notifying you that they need more than 40 days, review the letter carefully to be sure they’ve specified the information they need and that it’s information you haven’t already provided, even if in another form.  For example, if they claim they need documentation showing the pre-loss existence and condition of a piece of equipment, but you’ve already sent them a photograph of it, respond to the letter explaining that you’ve already provided the information and request that they decide the claim immediately.  If the additional information is something you have or can obtain, send it in as soon as possible and confirm, in an email, that you’ve sent it.  Ask that a decision be made promptly thereafter.  If the information the insurer says it’s waiting for does not seem essential to determining the cause, existence, extent or value of your loss, write to the adjuster explaining your position and demand a prompt response.  California insurance regulations require that they respond to communications from the insured within fifteen days.  Those regulations also forbid demanding information not reasonably required to resolve the claim.

If the delay seems unreasonable, write to your adjuster explaining in detail how the delay is affecting you or your business.

When can I sue my insurer for taking too long?

If your insurer takes too long to process your claim, your first option is to file a Request for Assistance with the California Department of Insurance. The Department will review the carrier’s claim file to determine whether they are complying with the deadlines set forth in the Department’s Fair Claims Settlement Practices Regulations.  The Department can impose fines for non-compliance, though it cannot force the insurer to accept your claim or tell it how much to pay.

If your insurer appears to be purposefully delaying your claim – such as requiring multiple but redundant claim reports – or demanding unnecessary information, you should consider retaining a lawyer  knowledgeable in insurance law. The attorney may be able to convince the insurer to make a prompt decision at that point, dispute any underpayment, settle the dispute if appropriate or hold your insurer accountable for its delays through a bad-faith lawsuit.