Commercial businesses obtain insurance for financial protections against potentially costly claims. Because a property insurance policy is a contract requiring compliance from the insured business, payout is not always guaranteed. Some reasons are typically used for claim denial.
Fraud and misrepresentation
Insurance companies will deny claims involving fraud such as faking evidence of the loss or providing misleading information on an application. But a court or other authoritative body must find the insured guilty of fraud before claim denial. If the policy holder is found innocent, the insurance company must pay their defense costs while the company may be entitled to their costs if it prevails.
Insurance companies may also deny claims by cancelling the entire insurance coverage for acts such as lying on an application or withholding material information. The insurer must notify the insured of the cancellation and return any premiums.
Unjust enrichment
Insurance is intended to return the claimant to the same place they would have been without harm occurring. Unjust enrichment occurs when they end up in a better place or receive money that exceeds their loss.
Intentional acts and illegality
Insurance companies will not pay for intentional acts, such as a business owner intentionally setting a fire at their business. But someone sued for defamation may be able to make a claim even if they did that act. Sometimes, laws may also restrict payment under certain circumstances.
Other policies
Claims may not be paid for coverage that require different insurance coverage. For example, professional services exclusion in a general policy would eliminate coverage for those claims.
Also, companies may have coverage provided by two companies. When this occurs, the companies negotiate allocation of coverage.
Timing
Claims must fall within the period of coverage or before the retroactive date unless the policy has prior acts coverage.
Claims must also be timely made after the event took place so the insurance company can investigate the claim. Insurance companies may need this time to exercise their rights to seek recovery from a third party.
Insurance coverage of lawsuits may be denied if the insured does not notify the insurer of the lawsuit when it was filed. This also includes any notification of an intent to sue.
Insurance companies, however, must comply with Oklahoma law. An attorney may help protect rights if a claim was illegally denied.