The life of a claim

Property policies commonly impose duties that begin at the moment of the loss rather than when the claim is reported: typically a duty to protect the property from further damage and to keep the damaged property available for inspection. Emergency mitigation such as tarping, board-up or water extraction is generally treated as the insured's obligation under the policy, and its reasonable cost is commonly part of the claim. The property's condition before repairs begin is evidence that cannot be reconstructed afterwards. What any particular policy requires is set out in its duties-after-loss condition.

Policies almost always require notice of a loss to be given promptly, and some states set an outside date by statute. Late notice is one of the defences that can defeat a claim on its own. Whether a carrier must also show that the delay prejudiced it, the notice-prejudice question, is answered differently across the country, which is why the source below is worth reading rather than summarising.

This is the first duty in the sequence that runs toward the policyholder. Unfair claims practices statutes and regulations in most states give the carrier a fixed period to acknowledge a claim and to supply whatever forms it wants completed. Those provisions are generally what a complaint to a state department of insurance points to. What the rule requires, and what follows from a breach of it, is set by each state.

The carrier assigns an adjuster (staff, independent, or after a catastrophe whoever is available) who inspects the property and prepares a scope of damage. Practitioners generally treat this as the stage where disagreements about scope are least expensive to resolve, since conditions documented on site are harder to reconstruct later. Several states set a period within which the investigation must begin.

A proof of loss is a signed, usually sworn, statement of what was lost and what it is claimed to be worth. Some states put the requirement in the policy by statute, commonly running from the date of loss; elsewhere it is a policy term, often running from the carrier's request. Because it is sworn, an inflated figure carries a fraud exposure rather than being a negotiating position. In several states a carrier's failure to furnish the form within a set period affects the requirement; the table below records what each state's sources say.

Accept, deny, or accept in part. A partial denial still denies the part it refuses, and claim-handling regulations generally require the reasons and the policy language relied on to be given in writing. In many states this clock runs from the proof of loss rather than from the notice of claim.

A first payment is commonly made on an actual cash value basis: replacement cost less depreciation, less the deductible. On a replacement cost policy the withheld depreciation is generally recoverable once the work is completed and documented, subject to the policy's own deadline for completing it. Where a mortgagee is named on the policy, payment is often issued jointly. How depreciation may be calculated, including whether labour can be depreciated, varies by state.

Concealed damage often surfaces once demolition begins, and prices move between an estimate and the completed work. A supplement is generally not treated as a new claim but as the same claim re-priced against what was found. Several states set their own deadline for supplemental and reopened claims, and it can be considerably shorter than the period for bringing suit.

Most property policies contain an appraisal clause: each side appoints an appraiser, the two select an umpire, and agreement between any two of the three sets the amount of loss. It is generally understood to determine value rather than coverage, so a denial of coverage usually falls outside it. Whether a demand binds once made, who bears which costs, and how long each side has to appoint are set by the clause itself and by state law, both of which differ.

A number of states require a formal notice, either to the carrier or to the department of insurance, a set period before suit may be filed, and give the carrier a window to respond. Where such a requirement applies, courts have treated non-compliance as fatal to the action. Deciding whether, when and how to bring a claim in court is legal work, and in most states it falls outside what a public adjuster licence permits.

Property policies generally shorten the time within which suit may be brought, and states differ on whether, and how far, that shortening is enforceable: some void it outright, some set a statutory floor. Such clauses commonly run from the date of loss rather than from the denial, which means a claim under negotiation for a long period can pass the deadline while it is still being discussed.