Insurance Recovery: How Policyholders Fight Back against Denied Claims

When an insurer denies a claim or disputes the scope of coverage, insurance coverage disputes counsel must evaluate whether the loss falls within the policy's insuring agreement, whether the insurer's interpretation of the coverage grant is consistent with the policy's plain language and the reasonable expectations of the insured, and whether the contra proferentem doctrine requires ambiguous policy language to be construed against the insurer as the drafter.

An insurer that invokes an exclusion to deny coverage bears the burden of proving that the exclusion clearly and unambiguously applies to the specific facts of the loss, and insurance payout disputes counsel challenging an exclusion must evaluate whether the exclusion's language is susceptible to more than one reasonable interpretation, whether the loss fits within any exception to the exclusion that the policy provides, and whether the insurer's reliance on the exclusion is consistent with its prior course of dealing with the policyholder.

A bad faith claim requires the policyholder to demonstrate that the insurer lacked a reasonable basis for denying or delaying the claim and that the insurer knew or recklessly disregarded the lack of a reasonable basis for its coverage position, and bad faith insurance claim counsel must evaluate whether the insurer conducted an adequate and timely investigation and whether the insurer's coverage position was supported by any reasonable interpretation of the policy.

A policyholder whose insurer has denied the claim outright or made an inadequate payment must evaluate whether litigation or appraisal proceedings offer a more efficient path to recovery than continued negotiation, and insurance claim lawsuit counsel advising on enforcement strategy must evaluate whether the policy's appraisal or arbitration provisions limit the policyholder's ability to pursue bad faith claims and whether a declaratory judgment action can efficiently resolve the coverage dispute.

The measure of recovery for a property loss depends on whether the policy provides replacement cost or actual cash value coverage, and insurance claims adjustment counsel advising on loss quantification must evaluate whether the insurer's estimate accurately captures the full cost of restoring the damaged property to its pre-loss condition, whether the insurer has improperly depreciated replacement components, and whether any code upgrade costs are properly included in the claim.

A business interruption claim requires the policyholder to demonstrate the causal connection between the covered physical loss and the period during which normal business operations were suspended, and business interruption counsel must evaluate whether the policyholder's historical financial records are sufficient to establish the baseline revenue against which the interruption period losses will be measured, and whether any extra expense incurred to minimize the interruption qualifies for reimbursement.

An insurer that pays a covered loss is generally subrogated to the policyholder's right to recover against the responsible third party, and subrogation claims counsel advising a policyholder must evaluate whether the policyholder has been made whole for its total loss before the insurer can assert its subrogation right, whether the policyholder's direct recovery rights against the third party are senior to the insurer's subrogation claim under the made whole doctrine, and whether any anti-subrogation rule applies.

A primary insurer that settles a large loss without ensuring that its reinsurance program will respond may find that the reinsurer disputes its obligation to pay, and insurance recovery and counseling counsel advising on a reinsurance recovery dispute must evaluate whether the reinsurance treaty's follow the settlements clause obligates the reinsurer to pay its share and whether the primary insurer's claims handling complied with the treaty's notification and cooperation requirements.