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.
“If it’s a liability claim—in other words, if someone slips and falls on the ice, or there is bodily injury—you always file that claim,” says Paul E. Felsen, CPCU, owner of Felsen Insurance Services, Inc. in Denville. “You don’t ever not report that. The reason is if somebody slips and falls and says ‘I’m okay don’t worry about it,’ that little black and blue mark they have today can turn into major back surgery six months from now. What seems like an injury that just needs a Band-aid or some antiseptic can turn out to be a $100,000 event. You always file a liability claim, no matter how inconsequential they may seem at the time.”
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.”