Rights and Remedies in Business Interruption Claim Denials
As a business owner, you depend on business interruption insurance to protect against losses when unforeseen circumstances force your operations to halt.
Despite premiums being paid faithfully, it’s not uncommon for businesses to face denials when they file a claim.
Understanding your rights and the remedies available is essential in such situations, ensuring your enterprise can recover and continue thriving.
Here’s what you need to know when facing a denial of your business interruption claim.
Know Your Policy
The language of an insurance policy can be complex, but knowing the ins and outs of your policy is the first line of defense. Review it carefully to understand:
- The coverage inclusions and exclusions;
- The definitions of covered events or losses;
- The specific conditions under which a business interruption must occur;
- The procedures and timeline for filing a claim.
Having a comprehensive understanding of your policy sets the stage for challenging a denial.
The Damages You Can Collect in a Business Interruption Claim
Business interruption insurance is designed to compensate a business for the income it loses during a temporary shutdown caused by a covered event, such as natural disasters, fires, or other insurable events, as outlined in the policy.
Understanding the types of damages you can collect on such a claim is key to ensuring your business recovers without significant financial impact.
According to the business interruption insurance lawyers at Dawson & Rosenthal, P.C. in San Diego, you can collect the following damages for your claim:
- Profits: This includes profits that would have been earned based on evidence from prior months’ financial statements.
- Fixed costs: This Includes the typical operating expenses of a business or other costs that are still incurred by the property even though the business has been interrupted.
- Temporary location: A policy may cover the expenses of moving to and operating from a temporary location.
- Commission and training costs: This insurance will usually cover the cost of providing training to employees of any machinery replaced by the insurer following a valid claim.
- Extra expenses: Business interruption insurance will usually reimburse reasonable expenses beyond the fixed costs that businesses have to incur to continue operation.
Request a Detailed Explanation
Challenge Discrepancies
If you believe the denial contradicts the terms of your policy, you have the right to challenge it. This can involve several steps:
- Providing further documentation or evidence to counter the reasons for the denial;
- Engaging in a dialogue with the insurance company to negotiate a resolution;
- Filing a complaint with your state’s insurance commissioner’s office.
Document Communication
Maintain meticulous records of all correspondence, calls, and meetings with the insurance company.
These records can serve as vital proof if you need to escalate the issue beyond direct negotiation with your insurer.
Use Appraisal and Arbitration Clauses
Your policy may have provisions for resolving disputes through appraisal or arbitration.
These tools can be faster and less costly than litigation, and they offer a formal mechanism for resolving disagreements about the value of a claim or the interpretation of policy language.
Seek Legal Representation
Consult with an attorney who specializes in insurance law and, more specifically, business interruption claims. An experienced lawyer will:
- Help interpret your policy;
- Identify bad faith insurance practices;
- Advise on the strength of your case;
- Represent you in negotiations or legal actions;
- Work to ensure that you receive the compensation you’re entitled to.
Be Aware of Legal Timelines
Every state has statutes of limitations set for how long you have to take legal action following a claim denial.
You must know these deadlines to ensure you do not forfeit your right to challenge the denial.
Business Interruption Claim Denials: Litigation as a Last Resort
If all else fails, litigation may be necessary to resolve the dispute. While it can be a lengthy and costly process, it also has the potential to result in a suitable settlement that covers your business losses.
In closing, a denial of a business interruption claim doesn’t mean the end of the road.
You have rights as a policyholder, and there are numerous remedies you can pursue to seek fair treatment from your insurer.
Armed with knowledge, documentation, and potentially the representation of a skilled attorney, you can overturn wrongfully denied claims and safeguard the future stability of your business.
