If you do a quick internet search you will discover lots of information about hurricane preparation, but not much about how to handle the aftermath. This is especially true for association board members and property management professionals. How should they handle the process of filing and navigating insurance claims for damage after a hurricane? Board members and property managers need to be cognizant of the details of their property’s insurance policy, such as the conditions they need to meet to ensure compliance with the policy throughout the claims process. We’ve created a helpful primer to the post loss process for association board members and property management professionals.
Know what is contained in your policy
An Insurance policy is a contract between you and your insurance company. It is a long contract with lots of pages, riders, addendums, and other complicated sections, but in the end, it is a contract. It is important for you to know: What did the parties agree to? What are each parties’ rights and responsibilities as defined by the contract?
Every insurance policy is different. Knowing your obligations, often referred to as post-loss conditions, to make a valid claim on the policy is key to ensuring that your community receives coverage for it’s damages. Policy holder obligations commonly include the need to provide a notice of claim, produce documents, sit for an examination under oath, and to provide a sworn statement in proof of loss.
About Notice of the Claim
Providing notice of the claim to your insurer is the critical first step to beginning the claims process. Know what the policy requires you to do to provide notice of, and where the notice should go. Hopefully, after receiving notice of the claim, they will investigate and promptly release funds to repair the damage.
Unfortunately, that does not happen as often as it should. The insurer may want to investigate the loss by requesting documents, taking examinations under oath, and/or asking for a sworn statement in proof of loss. Your policy requires you to cooperate in the investigation of the claim. While it may seem like a delay tactic, the insurer can argue they’re thoroughly investigating the claim. Patience is a must.
Showing Proof of Loss: Documents, Examinations and Sworn Statements
Your insurer may request you to provide repair records, maintenance records, meeting minutes, financial statements, and a variety of other documents. They ask for these documents to establish what damage existed prior to the claim, if any, as well as to evaluate potential coverage issues. Keep in mind that this investigation is almost always in an effort to limit what the insurer will have to pay out, as it’s financial interest is adverse to yours.
The association is required to provide a wide variety of documents that are responsive to the request. This can be a very time-consuming process, and it is not uncommon for communities to produce thousands of pages of documents. You may believe this is a waste of time, but keep in mind that as per your policy the insurer is entitled to request these documents and you are required to cooperate.
After they get all of your documents, they may ask for the examinations under oath of the insured. This is similar to a deposition taken during litigation but with some crucial differences. It is a standard practice for insurers to require this, and especially so if the claim being made is one which would merit a large payout. You, as a witness, are placed under oath and an attorney from the insurance company will ask a series of questions. The witness is required to answer, and answers will be transcribed by a court reporter.
This can be an intimidating and scary process for many people. It is highly recommended that your association or community retain the services of an attorney and that they attend all sessions. Generally, the examination under oath is only required of the insured. However, if they don’t know the technical details of damages or repairs, you can produce consultants and experts to fill in those gaps. In some cases, the insurer may request the examinations of several board members, the manager, or consultants in order to evaluate the claim. What examinations are required under the policy is a fact specific determination.
The sworn statement in proof of loss is an important trigger under most insurance policies. The policy will contain language that after the proof of loss is submitted a coverage determination will be made within a set number of days. However, in some cases an insurer will not request one, or after receiving one, the insurer may state that the proof of loss is not sufficiently detailed and therefor does not trigger the policy requirement to make a coverage determination.
The proof of loss is a very important document, and one which you should take very seriously. It is this document which sets out the total value of the claim. Once signed and submitted, the proof of loss represents what the insured is asserting, under oath, is the amount owed to the property or association. Although the proof can be supplemented with additional information later in the claims process, accuracy is very important.
Alternative Dispute Resolution
There are two primary ways to resolve an insurance claim without litigation: appraisal and pre-suit mediation. The appraisal process is governed in the insurance policy itself, and the pre-suit mediation process is governed by the Division of Insurance.
An appraisal is a type of binding arbitration which avoids the legal process. Many policies contain a provision for appraisals, which either party can choose to invoke. Appraisal is a binding compromise settlement. For this reason, many choose to avoid it due to the unpredictable outcome and the fact that it can’t be overturned if the result is bad.
An appraisal requires that each side in the dispute pick an appraiser. They then meet and try to agree on the value of the claim. If they cannot agree, they select an umpire, who will issue a binding decision. Your specific policy will then determine what happens next. Some policies require the umpire and one of the two parties’ appraisers agree on damage items before the process is binding. In other cases, the insurer may retain the right to deny the claim even after the appraisal award by finding no coverage existed.
The state has created a pre-suit mediation program to try to resolve insurance claims. Mediation is not a binding process, and the claim is resolved only if both sides agree to a resolution of the claim. The mediator cannot bind the parties nor make them agree to something the party does not wish to do.
Hiring a lawyer does not mean that you must file a lawsuit. Our firm resolves a significant portion of our insurance claim legal matters without the need for a lawsuit. If you are forced to file suit seeking a payout for your legitimate claim, there are many important considerations which should be considered with counsel. Issues such as venue, legal theories, basis for recovery, and the size and scope of the claim all need to be considered. The statute of limitations is also important to any claim-based litigation. Typically, an insured has five years from the date of denial of the claim to file suit. Of note, in Florida an insured has just three years to file a claim for Hurricane damage.
The circumstances and allegations will vary based on the specific facts of each case. However, in general your claim as a property manager or condo association would focus on the fact that your insurance company breached their contract by not timely adjusting or paying out on the claim. Other claims such as the failure of the insurer to comply with state statutes or for statutory bad faith may exist but the viability for such claims would have to be considered on a case-by-case basis. Preserving a potential bad faith claim by going through the statutory Civil Remedy Notice process is part of this process.
There are several defenses which are commonly raised by insurers. The first one will be pre-existing damage, in essence claiming that the damage was present before the hurricane and doesn’t merit coverage. Another common defense is asserting that the association failed to cooperate with the policy’s requirements. If the insurer can prove that the association failed to cooperate, then no payment is due under the policy. It is for this reason that cooperating to the greatest extent possible with the insurer’s investigation of the claim is important.
An insurance company may also allege fraud in the proof of loss, in examination under oath, or even in the insurance application you filled out to first obtain the policy. If fraud is proven, then the entire claim may be reduced to zero, meaning you will recover nothing. Never exaggerate the damage or scale of the loss when pursuing an insurance claim. The safest thing to do is to be conservative when presenting the claim to avoid unwittingly exposing yourself to allegations of fraud. For this reason, property management professionals are strongly encouraged to hire our firm early in the process.
In addition to claims against the insurance company for breach of the insurance contract, there may be claims against other parties as well. In light of the significant size of the deductibles involved in most hurricane claims for residential buildings, there could be claims for construction defects against the developer, general contractor, or other contractors, i.e., a roofing company for an improperly constructed roof. In some cases, there is also the basis for significant litigation against parties who did repair work which was done improperly.
Keep in mind that pursuing an insurance claim is seldom as easy or as clear cut as it should be. We would all love for the insurance company to simply write a check when presented with a valid claim from a policy holder. However, the reality is that the insurance company will devote resources to use the terms of the policy to closely evaluate sizable claims to minimize their financial obligations. When making a claim, the best course of action is to be fully prepared, be as accurate as possible, and retain the services of our firm as early as possible to avoid costly missteps and to maximize your recovery.