Business interruption insurance is an important form of financial protection. Executives and business owners carry policies that help protect companies from insolvency if unforeseen events occur.
Typically, business interruption insurance helps organizations pay for recurring costs when the company cannot operate as it usually does due to factors outside of the control of leadership. Rent or property loan payments, financing payments for equipment and even employee wages are less of a concern when a company has business interruption insurance.
Unfortunately, insurance companies sometimes deny valid claims. What happens after a refusal to cover appropriate business expenses?
Policyholders can take legal action
There are both federal and state laws regulating the insurance industry. Companies have to uphold the policies that they issue in good faith. Effectively, that means that they should not deny valid claims, unfairly delay the resolution of claims or misrepresent a policyholder’s rights and obligations.
The denial of a valid claim for covered losses is a clear-cut example of bad faith insurance practices. The company knows that the losses are eligible for coverage but refuses to pay the client’s expenses.
In many cases, denied business interruption insurance claims could be the difference between a company making it through an unforeseen emergency and failing because of the emergency. When insurance professionals deny valid claims, refuse to communicate or otherwise act inappropriately toward policyholders, legal action may be necessary.
Bad faith insurance lawsuits can result in the courts awarding policyholders the coverage they deserve, as well as imposing additional consequences on the insurance company. Reviewing policy documents and discussing the claim with a legal professional can help business leaders determine the next steps to take when an insurance company refuses to uphold a business interruption policy.