When a small business owner invests in commercial insurance, it is with the expectation that coverage will protect against unexpected financial burdens—like lawsuits, property damage and business interruption. Unfortunately, insurers do not always honor their promises.
A denied claim can leave a business exposed at a particularly consequential time, especially if that denial was made in bad faith or based on questionable reasoning.
What can be done?
Insurers often deny claims by citing policy exclusions, alleged misrepresentations or insufficient documentation. Sometimes, they argue that the event in question is not covered under the policy terms or that the claim was not filed properly. While not every denial is improper, small business owners should be cautious and proactive if they receive a rejection letter.
It is generally wise to begin by allowing an experienced legal team to closely review the insurer’s explanation and compare it to the language of the policy in the wake of a denial. Many denials hinge on narrow interpretations of policy terms that can be challenged. In some cases, insurers may misapply exclusions or overlook endorsements that actually support coverage. If the insurer’s denial seems unjustified or based on a misreading of the facts, legal intervention may be necessary.
Many states impose a legal duty on insurance companies to act fairly and promptly. If an insurer fails to investigate properly, unreasonably delays a decision or denies a valid claim without cause, a business owner may have the right to sue for damages beyond the original claim amount.
No small business should be left vulnerable after responsibly paying premiums for commercial coverage. Timely legal action can make a significant difference in a company’s ability to recover and continue serving its clients when a commercial insurance claim is denied unreasonably.