Insurance claims – Setnor Byer Insurance & Risk

Can You Save Money by Customizing Your Homeowners’ Insurance Coverage?

Many believe that expensive homeowners’ insurance is just the reality of living the American Dream. But, there are ways to lower your premium. This year, instead of (only) cringing and cursing about the cost of renewing your homeowners’ insurance, find out if any of these tips can reduce your policy premium.

Increase Your Deductible: The deductible is the amount you have to pay before the insurance company starts paying a claim. As a general rule, policies with higher deductibles have noticeably lower premiums. Also, find out if a hurricane-only deductible can be expanded to an all-wind deductible, which can produce policy credits and lower premium.

Bundle Policies: Some insurers offer substantial multi-policy discounts. Consider buying your homeowners’, automobile and umbrella policies from the same insurance company.

Eliminate Unnecessary Coverages: Homeowners’ policies often include coverages or limits that may be unnecessary or excessive. For example, Coverage B (Other Structures) under a standard homeowners’ policy generally covers structures that are not attached to the home, like sheds, detached garages, gazebos and pools. Homeowners with inexpensive or nonexistent ‘other structures’ may be able to lower their premium by removing or reducing this coverage.

Discuss Ordinance and Law coverage and other ‘Bells & Whistles’ endorsements. Weigh the benefits against costs. Consider how you want personal property (content) claims to be settled. Do you need replacement cost or can you settle for depreciated actual value?

Think Twice Before Filing a Claim. Gone are the days when homeowners’ insurance was used for every conceivable claim. Since filing a claim can lead to higher premiums, it may be cheaper to pay minor claims and claims that are clearly not covered out of your own pocket. If you’re not sure whether to file a claim, ask your agent.

Assess Your Personal Property. Make sure your personal property values are in line with the automatic coverage provided in most policies. Oftentimes, an accurate valuation reveals that coverage limits are significantly higher than necessary.

Your Home More Disaster Resistant: Insurance companies typically provide premium credits and discounts for improvements that increase the structural security of your home, like adding storm shutters or reinforcing the roof.

Improve Home Security: Discounts are often available for various safety and security features, many of which are relatively inexpensive, such as smoke and carbon monoxide (CO) detectors, burglar alarms and deadbolt locks. Bigger discounts may also be available for more advanced security devices, like sprinkler systems and monitored fire and burglar alarms.

Eliminate Recreational Safety Hazards: Did you know that in 2014 there were nearly 105,000 hospital emergency room-treated injuries associated with trampolines? Your insurance company did. Getting rid of recreational items like trampolines, tree houses and jungle gyms may lower your premium.

Maintain a Good Credit Rating: Insurers are increasingly using credit information to price homeowners’ insurance policies and charging higher premiums to those with lower credit scores. It’s a good idea to review your credit reports regularly and promptly correct any errors.

Work with an Independent Insurance Agent: Shopping around may be a good way to save money, but it can be time consuming and frustrating. Since independent insurance agents have access to multiple insurance companies, they can do the shopping around for you. Reputable independent agents are also more likely to know about special rates and discounts that may be available.

There are a number of other ways to reduce your premium, but options may be limited by market conditions or individual circumstances. Nevertheless, you should at least consider all the alternatives before renewing your homeowners’ insurance policy.

If you have any questions or would like to learn more about premium discounts that may be available, please contact us.

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What are the Costliest and Most Common Small Business Claims?

Running a successful small business requires more than the ability to generate revenue. It also requires the ability to avoid (or at least limit) losses. Though revenue can make a business blossom, losses can make it wilt. Oftentimes, what makes a small business successful is the ability to understand operational risks and implement appropriate protective measures for the day those risks become a reality.

To do this, small businesses must first understand the risks they face. This isn’t always easy because risk exposures may be affected by business operations. Nevertheless, there are some risks that generally apply to all small businesses. Consider the followings lists created by The Hartford after analyzing five years of claims data from more than 1 million business policies.

Most Common Property and Liability Claims

Burglary and Theft (20%)
Water and Freezing Damage (15%)
Wind and Hail Damage (15%)
Fire (10%)
Customer Slip and Fall (10%)
Customer Injury and Damage (less than 5%)
Product Liability (less than 5%)
Struck by Object (less than 5%)
Reputational Harm (less than 5%)
Vehicle Accident (less than 5%)

Costliest Property and Liability Claims

Reputational Harm ($50,000)
Vehicle Accident ($45,000)
Fire ($35,000)
Product Liability ($35,000)
Customer Injury and Damage ($30,000)
Wind and Hail Damage ($26,000)
Customer Slip and Fall ($20,000)
Water and Freezing Damage ($17,000)
Struck by Object ($10,000)
Burglary and Theft ($8,000)

Risks that are both common and costly, like fire, obviously require special attention. However, a proper risk assessment must go deeper. Note how burglary and theft rank as the least costly, but most common claim. Similarly, two of the costliest claims, reputational harm and vehicle accidents, are among the least common. This is significant because risk is a product of likelihood and severity.

Small businesses can use this information as a starting point. However, a comprehensive assessment requires analyzing exposures within the context of specific business operations. For example, a small convenience store is likely to have a higher risk of customer slips and falls than a large wholesale warehouse. Cyber risks are also likely to be greater for an online technology company than a traditional brick-and-mortar operation.

Though a standard Business Owners’ Policy may be sufficient, specific business operations may require additional coverage. Since it’s not always easy to see how operations may affect risk, small businesses should work with an experienced and reputable insurance agent.

If you would like to learn more about identifying and protecting against business risks, please contact us.

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Homeowners’ Insurance Claims: By the Numbers

Homeowners insurance is designed to protect against losses to your home and its contents, as well as liability for accidents that may occur on the property. Since the United States homeownership rate is nearly 65%, homeowners’ insurance is an important topic for many of us. To get a better understanding about the nature of homeowners’ losses and insurance claims, let’s take a look at some research compiled by the Insurance Information Institute.

Approximately 1 in 15 insured homes have a claim each year.
Wind and hail claims, which are experienced by approximately 1 in 30 insured homes each year, are the most frequent.
Claims related to fire, lightning or debris removal, which are experienced by approximately 1 in 230 insured homes every year, are the costliest.
Approximately 1 in 55 insured homes have a damage claim caused by water or freezing each year.
Approximately 1 in 190 insured homes have a theft claim each year.
Approximately 1 in 830 homeowners have a liability claim related to the cost of lawsuits for the bodily injury or property damage of others.

Loss Claims

Loss claims can be calculated in terms of frequency and severity. Claims frequency is the average number of claims filed per 100 policies. According to the Insurance Services Office (ISO), the most frequent homeowners’ loss claims are:

Wind and hail (3.37)
Water damage and freezing (1.79)
All other property damage (1.04)
Theft (.52)
Fire, lightning and debris removal (.43)
Bodily injury and property damage (.12)

Claims severity is the average amount paid for each claim. According to ISO, the most severe homeowners’ loss claims are:

Fire, lightning and debris removal ($34,306)
Bodily injury and property damage ($18,804)
Wind and hail ($7,307)
Water damage and freezing ($7,195)
All other property damage ($4,684)
Theft ($3,428)

Content Claims

The Content Claims Index shows the top contents categories of homeowners’ claims filed with approximately 300 insurers. The top categories, ranked by dollar value as a percent of total claims, include:

Jewelry (16%)
Electronics (13%)
Apparel (13%)
Furniture (10%)
Tools (5%)
Appliances (4%)
Sporting goods (3%)

Injury Claims

According to the National Safety Council (NSC), injuries requiring medical attention occur more often at home than in public places, in the workplace and motor vehicle incidents combined. In 2012, one in 16 people experienced an unintentional injury in the home that required medical attention. The NSC identified the following causes of the 63,000 deaths from unintentional home injuries in 2012:

Poisoning (50.5%)
Falls (28.1%)
Other (12.1%)
Fire, flames or smoke (4.1%)
Choking (3.7%)
Drowning (1.6%)

In addition to showing how claims happen, these statistics show that claims are likely to happen. Adequate homeowners’ or renters’ insurance is the key to recovering after a claim. An experienced and reputable independent insurance agent can help you identify those risks associated with your home and obtain the right insurance coverage to protect it.

If you have any questions or would like to see how Setnor Byer Insurance & Risk can help protect your home, please contact us.

Settling Insurance Claims: Good Faith or Bad Faith?

Insurance companies have a general duty of good faith when settling the claims of their policyholder. This duty of good faith can come from statute, common law, or both. For example, in addition to having a common law duty of good faith, insurance companies in Florida have a statutory duty to act fairly and honestly toward their insureds. Insurance companies that fail to act in good faith may end up in court defending a claim for bad faith.

Contrary to what many believe, it’s not bad faith for an insurance company to deny a claim that is not covered under a policy or to defend a claim subject to a reservation of rights. So what does it mean to act in good faith? According to one court, the duty of good faith requires insurance companies to investigate the facts, give fair consideration to settlement offers that are not unreasonable, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.

Those damaged by an insurance company’s failure to act in good faith may be able to sue the insurance company for bad faith. Bad faith claims can be first-party or third-party.

A first-party bad faith claim occurs when an insurance company is sued by its insured for refusing to settle the insured’s own claim in good faith. First-party claims typically involve allegations that the insurer improperly denied coverage, underpaid a loss or delayed payment without adequate justification. A common example of a first-party bad faith claim is when an insured is involved in an accident with an uninsured motorist and does not reach a settlement with his or her own uninsured motorist liability carrier for costs associated with the accident.

A third-party bad faith claim arises when an insured is exposed to liability in excess of insurance coverage because the insurer failed in good faith to settle a third party’s claim against the insured within policy limits. Third-party bad faith claims often arise in situations where there is clear liability on the part of the insured, severe injury to the third party, and minimal policy limits available.

Assume, for example, an insured with $100,000 of automobile liability coverage runs a red light and injures a pedestrian. Despite the pedestrian’s significant injuries and the insured’s clear fault, the insurance company rejects the pedestrian’s reasonable $90,000 settlement offer. The pedestrian goes to court and is awarded $200,000 in damages. By failing to act in good faith and settle the case within the $100,000 policy limit, the insured is liable for the excess judgment amount of $100,000.

In this example, the insured could file a third-party bad faith claim against its insurance company. The injured pedestrian may also be able to sue the insurance company, either directly if permitted by applicable law, or through an assignment of the insured’s rights. Note that in some jurisdictions insurance companies are entitled to notice before a lawsuit can be filed. In Florida, for example, those wanting to file a bad faith claim must give the insurance company 60-days’ notice before filing a lawsuit.

The claims settlement process can be long, complicated and stressful, even when the insurance company is handling the process in good faith. Since bad faith claims, particularly those involving third parties, can be very complex, it helps to have a reputable and experienced insurance agent to guide you through the claims process.

If you have any questions or would like to discuss your insurance options, please contact us.

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Why Did I Get a Reservation of Rights Letter?

Upon receiving notice of a claim, an insurance company must determine whether it is covered by a policy. If a claim is clearly covered, the insurance company will begin the process of defending or indemnifying the insured. Alternatively, claims that are clearly not covered will be denied. A Reservation of Rights letter is used when the insurance company isn’t sure whether a claim is covered.

Assume a customer files a lawsuit after being injured by a falling box. If the box fell because it was carelessly placed on a high shelf, a general liability policy would likely cover the claim. Coverage would be unlikely, however, if the box was intentionally dropped on the customer.

Though it may take months to find out what happened, the insurance company may only have days to take action. Rather than risk denying a covered claim, the insurance company can send the insured a Reservation of Rights letter, which gives the insurance company time to investigate the claim, and defend it, if necessary, without waiving its right to deny all or part of a claim at a later time if the facts ultimately establish a lack of coverage.

A Reservation of Rights letter also puts the insured on notice that all or part of a claim may not be covered. According to the California Supreme Court, by providing a Reservation of Rights letter, “the insurer gives the insured notice of how it will, or at least may, proceed and thereby provides it an opportunity to take any steps that it may deem reasonable or necessary in response–including whether to accept defense at the insurer’s hands and under the insurer’s control or, instead, to defend itself as it chooses.”

Reservation of Rights letters are used when the facts or the policy language may justify denying coverage for a claim. For example, insurance companies may use a Reservation of Rights letter when:

An exclusion in the policy does or may apply
The allegations in a lawsuit may be beyond the scope of coverage under a policy
Some or all of the damages are not covered by the policy
The insured may have failed to satisfy their obligations under the policy

A Reservation of Rights letter will typically:

Identify the specific policy covered by the letter
Summarize relevant facts
Quote relevant policy language
Identify and explain coverage and policy defenses

Though a Reservation of Rights letter does not necessarily mean that a claim will be denied, it must still be taken seriously. Depending on the nature of the claim and the potential exposure, professional guidance may be necessary when responding to a Reservation of Rights letter. An experienced and reputable insurance agent can help identify concerns, evaluate options and prepare a response.

If you have any questions or would like to speak with one of our Risk Management Professionals, please contact us.

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