Thought Leadership

How to Make an Insurance Claim

Claims Process 101

Property owners that make their first insurance claim often feel overwhelmed by the process.  This article is the first in a series which is intended to give an overview of the process.  In my first installment, I will summarize important obligations property owners hold during the claims process.

An insured property owner has several obligations when filing a claim.  The obligations are listed in the insurer’s policy.  Some of the obligations arise from state law.  The Minnesota legislature has a longstanding statute that mandates insurance policy form language.[1]  The statute does not write the entire insurance policy, but it does mandate language for certain key provisions.  Courts will “reform” an insurance policy so that the language matches the statute.[2]  The following are important obligations property owners should know and follow:

  • Send the insurer written notice of the loss as soon as possible;
  • Protect the property from further damage;
  • Execute a statement in writing, signed and sworn, to the insurance company.  This document referred to as a proof of loss, sets forth the value of the property insured.[3]
  • Cooperate with the insurer’s investigation.I will take these four obligations in turn.

    Immediate Notice

    A property owner ought to give “immediate” notice.  What is “immediate”?  Minnesota courts give the property owner some leeway with this obligation.  Policy language often requires notice “as soon as possible” or “as soon as practical” because an insured homeowner may not be able to immediately observe some damage.  Last year I prevailed on a motion in court where an insurer tried to argue a delay of two years in reporting a claim was untimely and thus defeated the property owner’s claim.  We defeated the motion because the homeowner was a very elderly man who was unable to get on his roof and observe hail damage to the shingles.  Within a month of his death, his estate (children) observed the damage and reported it.  Under these facts the court would not hold as a matter of law notice was untimely.

    Of course, I would never recommend any insured property owner wait two years.  I mention this case because it summarizes the legal principle:  insureds should act as soon as possible, but courts grant property owners some leeway in their reporting.  Every insurer who claims late notice may not simply look to a deadline in the insurance policy, the calendar, and declare coverage void.  In fact, an insurer must prove in court it is prejudiced by an alleged late notice.

    A good example of prejudice to an insurer is where a time delay inhibits its ability to investigate a claim.  As weather records are archived online, and more people use smartphones to record the storm as it happens, insurers have a tougher road than ever to show prejudice.  The mere passage of time is not enough to prevail.  If an insurer claims prejudice a property owner may be able to refute it and attain insurance coverage.

    Protect the Property from Further Damage

    Insurance policies, like contracts in general, require a damaged party to mitigate their losses.  An insurance policy is a contract.  Any party who claims a breach of a contract must mitigate damages.  An insured property owner must take some steps to protect the property from further loss even if an insurance company denies a claim.  What is reasonable?  The answer is determined on a case-by-case basis.  Associations should attempt to mitigate their damages before an insurer payment.  Fortunately, there is authority for the idea the insurer must reimburse the expense of mitigating some damage.[4]  The insurer’s policy may state whether such expenses are reimbursable.

    Sworn Proof of Loss

    The Minnesota Standard Fire Policy requires an insurer to submit a sworn proof of loss.  There is a 60-day deadline set forth in the statute; however the Minnesota Supreme Court has taken a sympathetic view towards insured property owners that are unable to meet the 60-day deadline.  Failure to submit a sworn proof of loss in a timely manner does not necessarily void an insurance claim.  It is not a “condition precedent” to a valid insurance claim.  The insurance company has to prove some type of prejudice, much like failure to deliver immediate notice.

    Notwithstanding the issue of timing, a proof of loss should be filed.  As I will describe in my next article, property owners have an incentive to file one.  While there may be flexibility in the deadline to file a proof of loss, without question an insurer can insist that one be filed.

    Duty to Cooperate

    Here is the statutory form language with the key text underlined:

The insured as may be reasonably required, shall exhibit to any person designated by this company all that remains of any property herein described, and, after being informed of the right to counsel and that any answers may be used against the insured in later civil or criminal proceedings, the insured shall, within a reasonable period after demand by this company, submit to examinations under oath by any person named by this company, and subscribe the oath.  The insured, as often as may be reasonably required, shall produce for examination all records and documents reasonably related to the loss, or certified copies thereof if originals are lost, at a reasonable time and place designated by this company or its representatives, and shall permit extracts and copies thereof to be made.

The statute refers to not one but multiple examinations under oath. An insured show damaged property as often as may be “reasonably required”.

The mere fact an insurer is making multiple requests for examinations and documents is not, standing alone, a violation of the law. However, there is authority in insurance law (outside the context of a storm or fire loss) that an insured need not repeatedly provide the same information.

To void coverage, the insurer has the burden to show a breach of a cooperation clause is “material” and operates to prejudice the insurer.[5]  By “material” the failure to do something must be significant and not trivial.  Requests for trivial information the insured refuses should not void coverage.  If the insurer does not have a piece of information, it must show that not having it is prejudicial to its investigation.  So, if the insurer already has receipt of the information at issue, why should the insured submit to an examination under oath?   There is case law to support this scenario.[6]  At the same time, courts closely guard an insurer’s right to investigate fraudulent claims with examinations under oath.  The statute says what it says:   insurers are entitled to at least one examination under oath.[7]  A property owner’s best course is to provide necessary information to an insurer under oath.  If the insurer asks for more information, it ought to be provided.  However, a property owner can draw the line at requests for the same information.

Associations will do well to heed these obligations when pursuing an insurance claim.

Published in CIC Midwest News, Vol. 14, Number 3, Fall 2015

[1] Minn. Stat. § 65A.01 subd. 3

[2] Watson v. United Services Auto Association, 566 N.W.2d 683, 691 (Minn. 1997).

[3] A proof of loss that contains the value of the loss may not be required for a “total loss”.

[4] Metalmasters of Minneapolis, Inc. v. Liberty Mut. Ins. Co., 461 N.W.2d 496 (Minn. Ct. App. 1990).

[5] Steen v. Underwriters at Lloyds, 442 N.W.2d 158, 162 (Minn. Ct. App. 1989).

[6] W. Nat’l Ins. Co. v. Thompson, 797 N.W.2d 201 (Minn. 2011).

[7] Minn. Stat. § 65A.01 subd. 3.