Policyholders often get upset with how long it takes their insurance company to respond to their requests for coverage. I frequently hear from our clients, “[w]e gave notice six weeks ago and need to defend this case now — why won’t they respond?” or “[w]e answered their three pages of information requests a month ago, so why haven’t they told us their coverage position?” Often these questions are phrased with more “colorful” language, and understandably so. Having worked for both policyholders and an insurance company, I know there are reasons for these delays — but not all of the reasons are good ones. This article discusses those reasons and what policyholders can do to accelerate the process.
What Causes Insurer Delays
There are many different reasons why it takes so long for an insurance company to respond to an initial notice, information response, or coverage request. Sometimes, an adjuster simply drops the ball and ignores the claim. On other occasions, the adjuster suspects the policyholder is misleading him. But most often, the reason for delay falls into one of the following categories.
- Assignment bureaucracy
When a claim is reported to an insurer, it must be assigned to an adjuster for handling. The adjuster assigned needs to be experienced enough to handle the particular claim and have enough time to investigate and respond. This assignment (or sometime reassignment) process sometimes takes longer than it should.
- Adjuster Case Load
The most common reason for an insurer’s delay is the adjuster’s case load. An adjuster likely has dozens of claims to handle at a time.
- Approval process
Many decisions made by insurers require the approval of one or more superiors, who also will have many other claims to review. Insurers do this to try to ensure consistency, make sure company positions are followed, and to try to cover their behinds.
- Need to consult with counsel or other expert
Some coverage decisions require opinions or consultations with in-house or outside coverage counsel. The need for a coverage opinion may delay the process for months. The same is true for claims that require the involvement of outside accountants and engineers.
- Claim seems complex
Claims that seem complex will require more time, approvals, and possible involvement of counsel. Plus, complex claims may be put on the back burner so that an adjuster can handle simple claims first.
- Information supplied is not easily processed
In order for an adjuster to process information received from a policyholder, it needs to be organized and in a format in a way that the adjuster can work with. Unorganized document “dumps” need to be sorted and categorized before analysis. Also, because the insurer may only work with electronically stored documents, hard copy materials may need to be converted to electronic documents.
What a Policyholder Can Do About Insurer Delays
Enough about the insurer excuses. Here are six tips for minimizing and dealing with insurer delays:
- Make it easier for the insurer
Although paying premiums seems like it should be enough, a policyholder will get better service if it makes the adjuster’s job easier. First, describe the claim accurately but in a way that minimizes complexity. Second, provide information needed for a coverage decision and enclose key documents electronically if possible. Third, respond quickly to information or document requests with a summary of the information provided. If that is not possible, explain why the insurer’s request is unnecessary or unduly burdensome.
- Be persistent but polite
Consistent reminders to the adjuster will help get your claim to the top of the priority list. Obnoxious, threatening, or annoying communications may have the opposite effect.
- Know the legal requirements for how long an insurer has to respond, and enforce them
Most states have statutory or regulatory requirements for how long an insurer has to respond to notice and other communications. For example, the time for responding to an initial notice may range from 10 business days to 30 calendar days or, in some states, “promptly.” The time for reporting on the investigation of a claim or issuing some type of coverage decision or reservation of rights may run from 15 days to a “reasonable time” after receiving a proof of loss or the necessary claim information. In some states, violations of these time period requirements are subject only to state administrative remedies, but in others, violations may give rise to a cause of action by the policyholder. A policyholder should know those requirements and use them to get a timely response.
- Get the insurer’s business people involved
The business/sales part of an insurance company hates to lose business, so getting that side of the company involved may give the policyholder additional leverage and accelerate resolution of the claim. In other words, if a policyholder runs into a roadblock with a claims adjuster, it can approach the underwriter and ask for help if the insurer wants to keep the business. This method is particularly useful if the policyholder is paying high premiums, is a long-time customer, or has a renewal coming up.
- Keep coverage counsel in background until needed
Although knowledgeable coverage counsel is very useful in pursuing a claim, the early appearance of policyholder counsel may slow the insurer’s response instead of accelerating it.
- Use coverage counsel when needed
Insurance carriers use coverage counsel on most large claims. Policyholders should do the same, especially when the insurer brings up legal theories, insurer coverage counsel appears, or the insurer has improperly denied a claim. At that point, policyholder coverage counsel should argue the claim and, if the policyholder is prepared to follow through on the threat, threaten to file suit.
Policyholders cannot eliminate delays in insurer responses. But, by understanding why the delays occur, and by knowing how to deal with delays, policyholders can minimize delays and often get the results they deserve.
Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series. For additional information about this post, please call 202-760-3160.