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How to Prove Your Business Property Loss to Your Insurance Company

On Behalf of | Jul 28, 2023 | Insurance Law

When your business is damaged by a storm, fire, theft or other calamity, you should notify the insurance company that provides your company’s commercial property insurance policy right away.  Don’t wait.  The policy requires that you report the loss “as soon as practicable.”  Waiting can mean that crucial information or evidence may be discarded or lost, memories could fade, and you could lose the full value of your claim as a result.

Here are a few “do’s and don’ts”:

  • Do make a video record of the damaged part of your building and other property, including the condition of the premises immediately after discovering the loss.
  • Don’t discard damaged property until the adjuster tells you it’s OK to do so.  And if you hire a restoration company to clean up the site or make immediate repairs, instruct them not to discard damaged property.  The policy requires you to make damaged property available for inspection, and discarding it before the insurer can inspect it can jeopardize your coverage. If you don’t have space to keep damaged items, notify the adjuster.  The insurer should pay the cost of storing the items until they don’t need them anymore.
  • Do cooperate with the adjuster’s reasonable requests, including making available the employees who have information about the cause of the loss, what was lost or damaged, and its value.
  • Do respond promptly to the adjuster’s requests.  Prompt cooperation will earn you credibility, and may get you paid more quickly.
  • Do confirm via email any telephone conversations with the adjuster in which you the adjuster requests information, you provide information, or the adjuster makes statements or promises regarding coverage, what must happen for your claim to be paid, or when their investigation will be completed .
  • Do assign one person primary responsibility for working with the adjuster and responding to their questions and requests.  Have that person accompany the adjuster or other insurer personnel on any visits to your location.
  • Do start immediately preparing a list of everything that was lost or damaged while memories are fresh.  You can supplement the list as you discover additional damage or loss.  The adjuster may provide you a form to use to prepare the list, though you’re not obligated to use it as long as you provide the same information their form requests.
  • Don’t assume that the insurer will take your word for it when it comes to proving the existence, condition and value of lost or damaged property.  The policy puts the burden on the policyholder to establish the existence, extent and value of the loss.  This means you are required to provide reasonable proof that, at the time of the loss, each item you are claiming actually existed, as well as information showing the item’s condition, age and purchase price.  Typically the adjuster will require you to provide supporting documentation for higher value items such as equipment, furniture, technology, precious metals, fine art and valuables as well as cash.
  • Do assign someone the task of collecting business records such as invoices, receipts and bookkeeping records you can provide the adjuster to establish the amount of your claim.  If you don’t have these types of records for all items, have this person contact your primary vendors to obtain copies of sales records, at least for items of significant value.  Your policy imposes a “duty to cooperate” with the insurer’s investigation that typically includes making reasonable efforts to obtain relevant records from vendors or others with whom you have a business relationship.
  • Don’t worry if you can’t find this type of information for every item you’re claiming. Most small businesses can’t.  Pre-loss photographs showing lost items generally suffice, as well lists of purchases you may have provided to your tax preparer for tax purposes.  Detailed descriptions and estimates of purchase dates and costs, provided by an employee in a position to know that information, may also be accepted, at least to fill in the blanks for items for which there are no other records reasonably available.

Collecting and providing all the information the insurer requests, especially for a larger loss, can be a daunting burden for a small business.  But if the insurer’s requests are reasonable, claiming you don’t have the time or staff to respond to their requests will not get your claim paid.  One option for getting help with these tasks is to retain a “public adjuster.”  Public adjusters are licensed insurance adjusters who work for policyholders, not insurers, and will help and represent you in presenting your claim to your insurer.  Public adjusters typically charge a contingent fee of around seven to ten percent depending on the work involved.

The insurer’s requests for information must be reasonable and not duplicative.  Your insurer can’t unreasonably demand that you submit secondary proof of a loss when the proof you’ve already submitted serves the same purpose. For instance, if you provide the adjuster a pre-loss photo or video showing lost or damaged items, the insurer can’t ask you to submit receipts for the same items featured.

Under California law, if the insurer does not accept or deny your claim, in full, within 40 days of your submitting the information needed to do so, they must send you a letter, every 30 days thereafter, explaining when they expect to make a decision and what information they still need.  Many insurers use form letters for this purpose which don’t actually detail the additional information they still need. If this happens, send an email to the adjuster demanding they supplement the letter to tell you exactly what more information is required.

Recorded Statements.  If the insurer demands that you make yourself or another company representative available for a recorded interview, you must do so, but be cautious.

  • Do consider consulting with an insurance coverage attorney before attending.
  • Do record the interview with your phone or other device. The insurance company is not obligated to provide you a copy of their recording and won’t usually do so.
  • Do be candid.  A knowingly false statement can provide the insurer a basis to deny the claim.
  • Don’t speculate about things you don’t know or remember. Tell the interviewer when you don’t know the information being requested.
  • Don’t be lulled into complacency, or into volunteering information the interviewer does not request, by the friendly demeanor of the carrier representative conducting the interview. Taking a recorded statement generally means the insurer has determined there may be a coverage issue, that you’re not providing all the information they’ve requested, or that there’s something about the claim that’s suspicious or unusual.  It doesn’t mean they won’t pay the claim, but a cautious approach to the interview is a good idea.

You should object, in writing, to unreasonable delays in processing your company’s claim or unreasonable or repeated requests for the same information,  If the claim is substantial, it may be worthwhile to consult with an experienced insurance recovery attorney, who can review the insurer’s conduct, identify ways in which its claim handling breaches its duties under the policy or its obligations under the California Insurance Code, and demand on your company’s behalf that the insurer promptly honor those obligations and pay the claim so that your company is placed back in the position it was in before the loss.  That’s what insurance is for.