Denied And Underpaid Property Claims
What a denial letter is really telling you, why most underpayments are scope problems rather than price problems, and the four routes back - in the order worth trying them.
Two different problems get talked about as one. Sorting out which you have is the first move, because they are answered in completely different ways.
A denial says: this is not covered, or it did not happen, or it did not happen then. That is a coverage or causation dispute.
An underpayment says: it is covered, and here is what we think it is worth. That is an amount dispute.
Why claims get denied
Under the wording, almost every property denial is one of five things:
- No damage found. A factual dispute about what is on the building.
- Wear, deterioration or defect. Coverage - the policy excludes gradual loss.
- Wrong date of loss. Causation - the damage is real but belongs to another event.
- An exclusion or endorsement - cosmetic damage, earth movement, flood, seepage over time, a roof payment schedule.
- A condition of the policy - late notice, no proof of loss, refusal of an examination under oath, failure to mitigate.
Each is answered differently, which is why the first thing to do is read the letter for the specific provision and the specific facts they relied on. If the letter is vague, write and ask. A carrier is expected to tell you the basis.
Why claims get underpaid
Underpayments are usually not price disputes. They are scope disputes, and the missing categories are consistent:
- Code upgrades under ordinance or law.
- General contractor overhead and profit on a job with three or more trades.
- Soft metals - gutters, downspouts, fascia, flashing, vents, screens.
- Detached structures.
- Interior damage that followed.
- Matching, where the replacement cannot be matched to what remains.
- Contents, additional living expenses, business income and loss of rents on a commercial file.
- Recoverable depreciation that was never invoiced for after the work was done.
Read the line items rather than the total. The total is a conclusion; the line items are where the argument lives.
The four routes back, in order
1. Supplement and rebut, in writing. Get the complete claim file, the carrier's photographs, any engineer report, the adjuster's CV, the certified policy and the reserve. Then answer the stated reason with evidence attached and a line-item scope in the carrier's own estimating format. This resolves most of the files we take on, and it requires nobody's permission. How to answer a denial and how to write a supplement.
2. Appraisal, where coverage is agreed and only the amount is disputed. Already in your policy, binding on amount, faster and cheaper than litigation, and it does not resolve coverage. How appraisal works.
3. A complaint to the Division of Insurance. Colorado's DORA does not order payment, but it puts a written explanation into a regulatory file and it costs nothing.
4. A lawyer. Where it is a coverage fight, where the delay or denial looks unreasonable, or where the suit deadline is approaching. Colorado's C.R.S. sections 10-3-1115 and 10-3-1116 allow recovery of two times the covered benefit plus reasonable attorney fees and costs where benefits were unreasonably delayed or denied - a remedy that materially changes carrier behavior. More on that statute.
The clock
Every route above runs against your policy's suit limitation, commonly one or two years from the date of loss in Colorado. It keeps running while you exchange polite emails, and a slow friendly back-and-forth that consumes the limitation period is the most common way a good claim dies.
Find the limitation in your policy now and write the date down.
Before you do anything
Get the complete claim file. It is the highest-value request in a contested claim and hardly anyone makes it. The carrier's own photographs frequently show damage their denial letter says is not there, and an engineer report commissioned to support a denial often turns out to be a two-page form whose conclusion does not match the images attached to it.
Ask in writing for: the complete claim file, all photographs, the estimate, any expert or engineer report, the adjuster's CV, the certified policy, claim determination letters, the underwriting file and the reserve.
Then read it before you argue.
Send us the denial letter and the estimate and you will get a straight answer about whether there is anything in it - including that there is not.
The rest of this guide
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