BY GINA CLAUSEN LOZIER AND MICHAEL HIGER
For a condominium or homeowner’s association, handling an insurance claim after a hurricane can be as daunting as the storm itself. Balancing an association’s duties under a property insurance policy and the obligations to its residents is intricate, as is an understanding of the policy’s post loss conditions. Now is the time for an association to familiarize itself with its property insurance policy and the best practices for handling an insurance claim.
All property insurance policies impose responsibilities on an insured in the event of a loss. One of those responsibilities is to provide notice of a claim. The purpose of a policy’s notice clause is to allow the insurance company to evaluate its rights and afford it an opportunity to investigate the claim. Depending upon the terms of the insurance policy, notice must be immediate, timely or prompt.
A failure to provide immediate, timely or prompt notice may jeopardize an insured’s right to benefits under the policy. If notice of a claim is not provided in the manner outlined by the policy, an automatic presumption of prejudice in favor of the insurance company may arise. That presumption means an insured would then have the burden to prove that the late notice did not cause prejudice to the insurance company. That burden may be difficult to overcome.
Most insurance policies do not define these terms or provide a fixed period of time within which an insured is required to report the loss. Most often, notice is necessary when there has been an occurrence that would lead a reasonably prudent person to believe that a claim for damages would arise. If an insured sustains damage to property from a hurricane, it is prudent to notify the insurance company or insurance agent even if it is unclear whether the loss is covered or would exceed the deductible. Acting with little or no delay will help an association protect its rights under the insurance policy and increase the chances of a timely resolution.
In addition to providing notice of a claim, an insured is responsible for making reasonable and necessary repairs to protect the property. This is also known as mitigating the damages.
Protecting the property or mitigating the damages after a loss may be as simple as securing a tarp on the roof or placing duct tape on a cracked window to prevent further water intrusion. However simple these steps may be, it is important that these steps be taken to preserve the right to recovery from the insurance company in the event of a loss.
An insured is also required to show all damaged property to the insurance company and allow the insurance company to inspect the damaged property. The reason for this is that the insurance company will be unable to adjust the loss and make a coverage determination unless it is able to observe and inspect the claimed damage resulting from the loss.
Ultimately, in the event of a loss, the association should do its best to protect the property from further damage. If an association does undertake any immediate efforts to protect the property, it is a good practice to photograph and document the condition of the property prior to making any repairs.
Following the reporting of a claim for property loss, the insurance company may send a written request for a copy of all records, documents, receipts, and/or proofs of purchase for all property claimed to be damaged. These requests will likely include copies of all contracts, estimates, proposals and/or invoices pertaining to repair, replacement or mitigation services provided to the property both before and after the claimed loss. The insurance company may also request an insured to produce photographs and videography depicting the condition of the property prior to the loss, damages sustained as a result the loss and repairs made after the loss.
The failure to produce requested documents such as records and receipts may cause a delay in the investigation of a claim and may result in a breach of the policy’s post loss obligations and duty to cooperate in the insurance company’s investigation, potentially leading to a claim denial. An association must also consider whether the production of documents to the insurance company violates any law or whether personally identifiable information is contained within the scope of documents. If so, it is prudent to discuss this issue with the insurance company and address the association’s concerns to protect the personal information of its residents.
Compliance with these threshold obligations is critical to an association’s recovery. Numerous obligations exist within the pages of an insurance policy. It is recommended in the event of a loss that the association assign a board member, or other point person, to familiarize the association with its obligations and coordinate compliance with the insurance company’s requests.
Keeping these issues in mind when faced with an insurance claim will assist the association in streamlining the claim process and preserving its rights to recovery. While each property insurance policy differs, the duty to provide prompt notice of a loss, make reasonable and necessary repairs, keep an accurate record of repair expenses and show the damaged property are standard provisions in nearly all policies. These provisions can be confusing and sometimes competing concepts. If you have questions regarding what an association’s policy entails, you should contact an experienced property insurance attorney.
Gina Clausen Lozier is a member of Berger Singerman’s firm’s Dispute Resolution Team and focuses her practice on first and third party claims and coverage analysis. Ms. Clausen Lozier is involved in many aspects of the insurance industry and uses her prior experience as a defense attorney to assist property and business owners in disputed claims.
Michael J. Higer is a partner of Berger Singerman’s Dispute Resolution Team and is an experienced litigator and trial lawyer who has devoted his practice to commercial litigation and civil trial work involving a wide variety of matters. While representing clients with diverse needs in a wide variety of matters, Higer’s practice has principally focused on debtor/creditor, intellectual property and insurance matters.