Bill Quickel's - Insurance Plus Agencies Inc. Blog
How long can an insured wait to file a homeowner’s claim with the insurance company? This question is not asked often, but it can have serious financial consequences if you don’t understand the implications of timely claim reporting.
Throughout my insurance career I have reminded people that it is extremely important to read their insurance contracts. It’s not nearly as interesting as a good mystery novel, but it is critical to do before a loss occurs. In addition to understanding what is covered, you should also determine what requirements the contract places on you, the insured.
Why is this an important topic? If your insurance company proves that you are not in compliance with a condition in your homeowner insurance policy (a legal contract), your claim may be denied.
Before I delve into specific examples of late claim reporting, let’s briefly review a homeowner’s insurance contract – the standard Insurance Services Office (ISO) Homeowners 3 – Special Form policy. For ease, I will use “HO-3” to reference the homeowner insurance contract. Please remember that individual insurance companies will use slightly different language for their loss reporting requirements, so be sure to read your policy or ask your insurance agent for clarification.
The ISO HO-3 has a subsection entitled, “Duties After Loss.” Older homeowner contracts use may “Duties after Occurrence.” They are similar, but not identical. Let’s review the first requirement of “Duties After Loss,” which is located in the Conditions section of our HO-3 homeowners policy. Regarding the timing for filing a claim, the underlined sentence below is crucial.
Duties After Loss
In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you, an “insured” seeking coverage, or a representative of either:
1. Give prompt notice to us or our agent
In our policy the requirement is to “Give prompt notice to us or our agent.” In other homeowner contacts you may have seen similarly worded requirements such as:
Each of these phrases can be – and have been – interpreted in various ways by insurance companies and by courts during litigation.
For our HO-3, what does “prompt” mean? The Oxford Dictionary states;
Done without delay; immediate. (Of a person) acting without delay
quick, swift, rapid, speedy, fast, direct, immediate, instant, expeditious, early, punctual, in good time, on time, timely
For the most part, this seems like a fairly simple concept. If you have a loss you must advise your insurance company or agent “promptly.” Typically this is not a problem. As an example, if after a severe thunderstorm, you see that a large tree branch has fallen onto and damaged your porch, you call the insurer and report the claim. Easy.
But what if a loss isn’t quite as clear-cut? Here are several examples.
The Homeowner’s contract claim reporting requirements are in place to protect both the insurance company and the insured. By providing prompt notice, the insurance company can determine whether any additional investigation or follow-ups are necessary or warranted.
At first glance it seems reasonable not to report these three claims to the insurance company. But let’s dig a bit deeper.
These three seemingly innocuous incidents have now exposed you to potentially large financial loss. If the occurrences had been reported to the insurance company immediately, they would very likely be covered by your homeowner’s insurance. But because nothing was initially reported to the insurer, there is now potential for coverage to be denied.
There is a reasonable chance that your insurance company will cover the roof damage and subsequent water damage, even though the roof damage was not promptly reported. This is because you could not know or see that the falling tree branch went through your roof unless you climbed up on the second story roof, which you cannot practically be expected to do. However, by not reporting and/or inspecting after the first storm, a simple roof repair turned into a significantly more expensive home remodeling and restoration claim.
The two injury claim examples may or may not be covered by your policy. It is dependent upon the insurance company’s interpretation of prompt notice of loss. Unlike the hidden roof damage in the first example, you were immediately aware of the injuries sustained by Ann and by Joey. Even though both of the children’s parents said that everything was OK, that does not absolve you, the homeowner, from liability. In each of these cases, had they been reported to your insurer immediately, the company would have followed up to ensure the children were OK or would have gotten them additional medical care as necessary. Now there are many more bills and a lawsuit to contend with.
So, how long can you wait to file a homeowner’s claim? Or, asked differently, should you wait to file a claim? Most people do not want to file an insurance claim. It can be a hassle and it may even cause your future insurance rates to rise. However, at the end of the day the reason for homeowner’s insurance is to protect you and your family from catastrophic financial loss. This insurance professional will tell you that there is simply too much risk for anyone to delay or wait to file a homeowner’s claim. Promptly means promptly, so when in doubt, file the claim immediately.
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