When a property damage insurance claim is wrongfully denied or underpaid, the costs associated with getting a fair payment often fall on the policyholder. This includes, but is not limited to, the use of Public Adjusters, appraisers, and other subject matter experts that must prove the insurance company made an error in judgment. The burden of proof falls on the insured if the insurer does not pay the claim correctly and there is a dispute on either the scope of the damage, repair recommendation; the total ‘amount of loss’.
Insurance companies know that if they fail to settle an insurance claim correctly, the insured will need to hire a third-party expert to attempt to collect a proper settlement. A way they leverage the policyholder is by demanding a ‘Proof of Loss’ that gives an insured the burden of having to prove their damages within 60 days if they view their damages differently than the carrier. The fees due to those professionals are natural, probable, and foreseeable consequences of the dispute. In addition, attorney’s fees are recoverable for the non-breaching party in many jurisdictions. The same treatment should apply to a public adjuster and expert fees, as well.
Even though these costs should fall under the common law doctrine of consequential damages, most states don’t allow for the recoverability of the public adjuster fees and other experts. This leaves policyholders paying thousands of dollars out of pocket to get a fair claim payment.
In many states, the carriers can simply leverage the law of diminishing returns to bully a policyholder into an unfair settlement.
SB 22-094 will fix this in Colorado. This bill is sponsored by Julie Gonzales and Don Coram and, if passed, will allow policyholders to be reimbursed for out-of-pocket costs to substantiate denied or underpaid claims. The beauty of this proposed law is that the carrier need not worry about additional Loss Adjustment Expenses (LAE), if they simply pay the claim correctly the first time.
SB 22-094 text: The bill entitles a first-party claimant in a property and casualty insurance claim to seek reimbursement for the reasonable costs incurred to substantiate the claim if the claim was denied, in whole or in part, by the insurer and the first-party claimant then obtains payment for a claim that was wholly denied or payment in excess of any initial payment for a claim that was partially denied.
American Adjuster Association works to shed light on policyholders’ issues in the claims process and advocate for a fair and balanced claims system. Become a member and help pass legislation that protects policyholders. Contact us today to learn more or email [email protected].
