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The most common excuses for refusing property claims in litigation – Blog about property insurance protection legislation



While researching the nerdy topic of what circumstances laws and regulations pay for existing violations of building codes discovered as a result of an insured hazard, I came across a court decision from a case in Indiana, 1 that shows many of the common excuses that insurance companies' defense attorneys make in lawsuits. I suggest that the decision and the insurer's request for a summary judgment are good lessons for those involved in helping policyholders as it has become typical that insurers, even after paying part of the claim, will have their lawyers argue for every conceivable grounds for refusal afterwards.

Auto-Owners Insurance Company defended itself in a claim for summary judgment with the following excuses for further non-payment:

  1. Prescription was adopted before the action was brought.
  2. Notice of loss was not given in due time

    1. ] Failure to protect the building from further damage.
    2. Repairs not made in time.
    3. Costs of law and regulation that have not arisen or work completed.
    4. Damage caused by excluded and already existing wear004] Damages. [04] Damages. caused by incorrect construction.
    5. No law and regulation coverage because the building already had existing code violations when it was built.

    These were only the reasons given for the summary judgment. In most cases, the insurance company's lawyers will also claim some form of fraud in connection with the amount requested. These "excuses" for not paying will be part of the discussion at the RMAPIA event tomorrow.

    Regarding the law and the regulation issue, the district court did not grant a summary judgment and noted that the policyholder may have a chance of a summary judgment on that coverage issue the insurer agreed to pay for law and regulation before the lawsuit was filed:

    The court notes that neither party has informed whose burden the issue would lie in the trial. "In accordance with Indiana law, an insurer that relies on an insurance exclusion from coverage has the burden of proof in the matter of whether the exemption applies." Thorne v. Member Select Ins. Co. 899 F. Supp. 2d 820, 824 (N.D. Ind. 201

    2) (citing PSI Energy, Inc. v. Home Ins. Co. 801 N.E.2d 705, 725 (Ind. Ct. App. 2004)). Given that it would probably be the defendant's burden to establish non-compliance at the trial, the plaintiff's failure to provide evidence supporting the warehouse's code compliance is not fatal at the summary assessment stage. On the other hand, the plaintiff claims that, since the defendant originally stated that the regulation and legal coverage were indeed applicable, it is now prevented from changing its position … Since the defendant consistently stated that it intended to investigate the claim, it is a fact that the plaintiff emphasizes when it considers whether the defendant relied on Tutt's request that the ceiling be code – compatible, and since the plaintiff has not requested a summary assessment in this matter, the court refuses to find that the regulation and the legal coverage apply; the court only concludes that the defendant has not established that the roof was not code-compatible so that the coverage would not apply.

    For policyholders with claims for wind and hail claims, these issues arise all the time. Where does the money come from to rebuild if the claim is not paid in full? Why is wear and tear not treated as a depreciable item rather than as an exception? Awareness of a pre-existing breach of the building standard is usually not known until a loss occurs and someone points out the problem and a building permit is not issued. How do you determine exactly what storm caused a loss if you do not put yourself in danger or constantly pay for someone to get on a roof? How can you report in time if you are not aware of a loss that is usually detected from a leak that occurs months after a loss? Few buildings are ever perfectly built according to all building standards. So why do insurance company consultants seem anxious to find these code and execution issues while turning a blind eye to the damages that caused the claim to be made in the first place?

    Thought For The Day

    The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands in times of challenge and controversy.
    —Martin Luther King, Jr.
    ] ______________________________________
    1 Kokak LLC v. Auto-Owners Ins. Co. No. 2: 18-cv-117 (N.D. Ind. 27 Dec. 2021).


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