Tips on When to File — or Not File — an Insurance Claim
A series of small claims is often more damaging to insurance rates than a single major loss, such as a fire,
Feb. 23, 2024 — There are ways for co-op and condo boards to soften today's hard insurance market.
In today’s hard insurance market, co-op and condo board members and their property managers should be rigorously scrutinizing their claim-filing procedures. Insurance carriers are becoming ever more choosy about the risks they decide to insure, and claims are one of the main things carriers evaluate when deciding whether to take on a new risk or renew an existing policy. Here are six questions all boards should ask before filing a claim:
Has this property had a lot of claims in the recent past? Claim history is a big factor when underwriters are scrutinizing your property for coverage renewal. In short, the fewer claims you have, the more favorable your risk appears to insurers. Most insurers even view one large “shock loss” that's in the six-figure range — a major fire, say — as more favorable than five small losses that pay out a few thousand dollars each. Recurring issues are also looked at unfavorably by carriers. If you have five claims for broken pipes, the carrier will likely conclude there is an issue with the building’s plumbing and/or maintenance practices, and the carrier may choose to either substantially increase your premium or get off the risk altogether.
Should we file a claim if the damages exceed the deductible by just a few thousand dollars? While this is an internal decision for the board and management, it may be prudent in this hard insurance market to avoid filing a claim for a payout of less than $5,000. Why? Because any claim that gets paid out, regardless of the amount, is a negative mark and could have a negative effect on future premiums. It might be wiser not to file that small claim.
Is the damage a covered loss? Insurance is designed to cover sudden and accidental losses. Damage that is a result of long-term wear and tear, deterioration and/or lack of proper maintenance is excluded on every insurance policy that I have ever seen. Typically, if you cannot pinpoint the exact time of the damage, there will likely to be coverage issues.
Can we ask our agent if a claim is covered before filing? The only way to know for certain if a claim is covered is to file a claim and have a representative from the carrier come out, investigate and make a coverage determination. We can give our OPINION on whether or not we think the claim is covered, based on the policy language and our experience. But the only way to know for certain is again to file a claim. If we are told to file a claim in writing, we are obligated to report it to the carrier at that point.
When should we definitely not file a claim? If the damages do not exceed the policy’s deductible, there is no reason to file a claim. The deductible essentially says that the association is responsible for the first X amount of damages under the policy. If the policy has a $10,000 deductible and you only have a water stain on a ceiling, the carrier is not likely to make any payments on this claim — and you have added an unnecessary claim to your history.
How do I know if the damages are under the policy’s deductible? It is perfectly acceptable to call in a contractor you trust to evaluate and give you an estimate for the damages, then use that estimate to decide whether or not the damages will exceed the deductible — and whether or not it makes sense to file a claim.
Donald Schatzle is claims director at the insurance brokerage Mackoul Risk Solutions.