Insurance policies are contracts. You and your insurer are contracting for specific things. Both parties to the contract will have rights and obligations under the contract.
Your Obligations
It is your obligation to:
- Report All Claims-
Your business must report all claims including those things that may reasonably become claims. I know business owners that do not report a claim until a law suit occurs. This is a bad practice and will jeopardize your business insurance coverage. Never try and settle a claim without contacting the insurer. When in doubt - report.
- Cooperate In Your Defense and the Investigation of the Claim-
Your business must cooperate with the insurer in its investigation and with any attorney appointed to defend your business. Many business owners take the “report and forget” approach. If you do not cooperate, then the insurer may deny defense and indemnity because you have breached the contract by failing to cooperate.
- Provide Truthful Information-
In most states it is a felony to knowingly submit claim documents that are false. It is fraud and you will be caught – eventually. Some business owners are tempted to inflate the value of a loss to “make up for” the deductible. Never submit false claims and, in fact, have an independent party produce an appraisal of things that may be questioned by your insurer.
Your Insurer’s Obligations
It is the insurer’s obligation to:
- Follow all Laws and Regulations in Your State –
The insurer must follow all of the regulations and laws of your state. This includes consumer laws.
- Defend Your Business in Case of a Claim-
The insurer has a duty to defend your business if a claim is made that may invoke coverage. This duty is very broad. Even if the insurer believes the claim is not covered, the insurer will still have to defend your business subject to a “reservation of rights.” A reservation of rights is a letter that tells you the insurer will defend but reserves its right to deny payment on the claim because it is not covered.
- Indemnify Your Business for Loss or Damage From a Covered Cause –
Your insurer must indemnify (pay) for any covered loss up to the limits of insurance stated on the policy.
These are the basic obligations of the insured and insurer across all fifty states.
