To Claim, or Not to Claim? The Insurance Dilemma

Individuals, associations and other entities carry insurance coverage to protect them from liability, loss, and other financial and legal threats—that's pretty basic. What isn't always so basic is deciding when to file a claim versus paying out of pocket for a loss or damage.

Paying—whether for property damage because of something like an unaddressed leak, or an injury sustained on-premises—can be very expensive, and arguably defeats the purpose of paying insurance premiums for coverage. On the other hand, a history of claims can cause a building or association to pay ever-higher premiums, or even be dropped from its insurance entirely…or so conventional wisdom tells us. Let’s investigate further.

Name That Claim

When determining whether or not to claim a loss on an insurance policy, the first criterion is what sort of claim it would be. A broken window or a leaky roof is a vastly different matter than a slip-and-fall. Let’s take the latter scenario first, as it is more straightforward.

“Liability claims should always be put in to the insurance company,” says Ed Mackoul, president of Mackoul & Associates, an insurance brokerage in Island Park. “There’s just a certain amount of time, if you don’t report that claim, the insurance company can come back and say you prejudiced their case, and a liability suit can run into the millions. So once you’re aware of anything on the liability side if you get a letter, or somebody claims they got injured, anything along those lines—you need to put the claim in.”

In our litigious society, this is a hard rule when it comes to injuries. Remember the case of the woman who sued McDonald’s because she got scalded by hot coffee? Anything can happen beyond the realm of insurance protection. “In an injury situation, I advise the client to always report it to the carrier, even if there seems to be no harm done,” says Mike Bostley, the senior vice president of claims at Manhattan-based DeWitt Stern, an insurance brokerage and risk management group. "Because if you don’t, and it turns out to be a tricky case where what initially appeared to be a minor injury turns out even a year later to be something where the person needs surgery, or even if it just develops into a very high-profile case… at that point you’re jeopardizing your coverage with the insurance carrier for late notice. And to investigate it under a reservation of rights to a possible declination.”

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