Collecting on difficult claims


Insurance is the type of product that you
might never know how good it is until
you really need it. And nothing can be more frustrating than encountering difficulty in collecting on an insurance claim,
especially one that involves significant dollars. When the stakes are the highest, that’s
the time when you expect, and need, your
insurance carrier to step up and protect
you.

“Any time our clients have a potentially
big dollar claim, I get very involved,” says
A. Peter Prinsen, vice president and general counsel for The Graham Company in
Philadelphia.

Smart Business asked Prinsen how company owners can work with their insurance carrier to successfully resolve the
most difficult claim situations.

How do you define a tough claim?

Any claim with complexity and a high
dollar value can be tough to resolve. Large
claims have a significant financial impact,
so they tend to get everyone’s attention
right away. Complex claims can be tricky,
especially if the insurance carrier either
reserves its rights to deny coverage or
denies coverage from the very beginning.

How can insurance carriers deny coverage?

Insurance companies rely on the facts of
the claim and the language in the insurance
policy to determine whether they are going
to pay a particular claim. The insurance
policy is essentially a binding legal contract
between the insured and the insurance
company. In exchange for the premium
paid by the insured, the insurance company agrees to pay for losses subject to the
terms, conditions and definitions found in
the insurance policy. If the insurance policy language does not clearly cover the
facts of a particular claim, then the insurance company can deny coverage.
Insurance companies don’t necessarily like
to deny claims — they are merely going by
their view of the language in the insurance
policy.

Do larger claims get denied more frequently
than smaller claims?

In the interest of maintaining a good business relationship, insurance companies
usually want to make claims settlement as
quick and painless for their clients as possible. As the dollars go up, however, the
details of the insurance policy and the facts
of the claim receive more scrutiny.

How can companies increase their odds of
success in collecting on a tough claim?

There are two critical components to this
process — the first is to negotiate the
broadest coverage possible, and the second is to document the facts of your claim
as quickly and completely as possible. By
negotiating broad coverage, I mean that
when it comes time to renew your insurance policies, you must pay attention to the
coverage provided (or not provided) by
them. The biggest mistake I see is when
decision-makers only pay attention to
price, without consideration for the coverage provided by their policies. If you have
a flood claim but your policy includes a
specific exclusion for flood, you are not
going to be able to collect for your loss. Be
sure that you understand the conditions, definitions and exclusions in your policies.
Sometimes it’s better to know what your
policy does not cover. There is no worse
time to negotiate the coverage provided by
your policy than after you’ve had a big loss.

Next, when you have an accident or incident that will give rise to an insurance
claim, document the facts as completely as
possible. If it’s an accident, have your insurance broker get the right people out to the
scene of the accident as soon as possible.
Take pictures, interview witnesses, hire an
accident reconstructionist to put together
the evidence. When the dollars get really
big, moving quickly to gather the right
information is critical. I’ve seen too many
cases go the wrong way simply because
the insured didn’t have enough evidence to
support its side of the story.

How do you like working on this side of the
table?

As I said before, insurance companies
generally want to do the right thing and
make the claims settlement process as
quick and as pleasant for their customers
as possible. The challenge comes when the
dollars get bigger. My role used to be issuing coverage opinions, which means that
insurance companies would hire me to figure out whether or not coverage should be
provided (or not provided) by an insurance
policy for a particular claim. If there were a
few million dollars at stake, the insurance
company wanted to figure out if, and to
what extent, it was liable for a particular
claim. Working on the insured’s side of the
table is fun. It is rewarding to be part of
that process and know that we’ve been
able to help them keep their business running and prospering. I like knowing that
we’ve been part of the solution.

A. PETER PRINSEN is vice president and general counsel for
The Graham Company. Reach him at (215) 701-5284 or
[email protected].