Commercial insurance protects companies from the costs of unexpected events, such as property damage, liability claims, and theft. In Hawai‘i, natural disasters create an increased risk for business interruption. When a claim is denied for any reason, business owners need a clear resolution plan to address the claim denial and resume operations with as little interruption as possible.
What specific steps can business owners take to resolve a claim denial? Step-by-step, this guide outlines the process of business insurance claim denial, resubmission, and acceptance to help business owners recover from disasters and get operations back on track.
Common Reasons Why Business Insurance Claims are Denied
Before reviewing the steps following a claim denial, it’s important to identify why claim denials can happen in the first place. Common reasons for claim denials include:
- Incomplete or inaccurate claim documentation
- Missed deadlines or misfiled claims
- Lapsed or canceled policies
- Claims that fall outside of the limits or eligibility of policy coverage
- Specific causes of loss that are not covered or excluded on the policy
Filing accurate and timely claims can prevent claim denial, but business owners who have already received a denial letter should consider the following steps.
Step-by-Step Guide: What to Do if Your Claim is Denied
Taking immediate action following a claim denial can help business owners put their denial in context, address the issue, and receive their payouts:
Step #1: Review the Denial Letter Carefully
The denial letter from the insurance company often states the reason(s) for the claim denial. Understanding the cause of the claim denial will inform business owners how to proceed.
For example, if the denial was caused by a lack of coverage, there may not be any way to recoup the damage this time. However, if the reason was missing or inaccurate documentation, resubmitting the proper information may change the claim’s status.
Key Takeaway
The denial letter is the owner’s best resource to acknowledge the cause of their claim denial and make a plan for getting the compensation they deserve.
Step #2: Revisit Your Policy
After receiving the insurance company’s denial reasoning, business owners should revisit their policy. If they believe the insurance company made an error, they may confirm coverage details, limits, and exclusions to refile their claim with more detailed documentation. If they can point to the specific policy text which justifies their claim, they may be able to resolve the issue with these simple notes.
However, if the insurance company is correct about their coverage, they may not be able to save the current claim, but policy changes can be made to protect the business against similar claims in the future.
Key Takeaway
Confirming policy documentation helps business owners clarify the legitimacy of their claim denial.
Step #3: Gather Additional Documentation
An error in the claim’s documentation, both in the text and filing process, is a common reason for denial. This is often the case if the missing documentation is essential to proving their case. Taking steps to gather this documentation can resolve the issue, including:
- Collecting receipts, incident reports, and expert evaluations of the damage
- Taking and submitting accurate photos (preferably with a before and after) confirming the damage
- Submitting a copy of the text in the insurance plan that confirms the eligibility of the claim
- Retrieving third-party valuations of asset value or submitting pre-existing valuations of assets from before the damage occurred
Assembling additional documentation can confirm the claim’s eligibility and answer other future questions, which can improve claim acceptance and reduce further delays.
Key Takeaway
Insurance companies often deny claims due to inaccurate or incomplete documentation. Resubmitting the correct documents in greater detail may help the business’s claim be approved.
Step #4: Request a Clarification or Second Review
If the denial letter is unclear or you believe the insurance company is in error, contact your agent or broker to learn more about the denial in detail. Requesting a written clarification of the denial can help owners address the cause with more specific actions.
Key Takeaway
Since evidence disappears and claim timelines are often limited, business owners should request clarification early to learn the reasons behind their failed claim while they still have time to correct them.
Step #5: File a Formal Appeal
Insurance companies have a formal appeal process for denied claims to be resubmitted and reviewed. This will typically require additional documentation and evidence or a more detailed argument supporting the claim, its valuation, or the business owner’s policy benefits. Strictly adhere to your insurer’s appeal process.
Key Takeaway
Though insurance companies offer a formal appeals process for claim denials, the process, timeline, and likelihood of a change in their verdict varies based on the plan and the situation.
Step #6: Seek External Support if Needed
An insurance broker or attorney may be able to shed light on the reason for a claim’s denial. Since successful claim submission requires input from numerous people, further communication may be able to help the process. For example, a third-party specialist can provide guidance on how to resubmit asset valuations, file a formal appeal, or gather additional documentation to improve the claim.
Key Takeaway
Business owners do not have to recover from a claim denial alone. Seeking expert guidance can strengthen their case or improve their insurance workflows for similar situations in the future.
Step #7: File a Complaint or Seek Legal Action
Business owners may believe that their claim was unfairly denied. If internal processes cannot resolve the issue, businesses may file a complaint with the Hawai‘i Insurance Division. This will require additional documentation and proof of wrongdoing. Local insurance experts will likely be needed to help owners resolve their claim using this method; the costs in time and money of doing so may not balance with the possibility of a resolution.
Key Takeaway
This option can resolve a claim denial, but it should be considered more of a last resort since it can complicate the relationship between the business and the insurer.
Tips to Help Prevent Future Claim Denials
By following these steps, business owners may be able to resolve their claim denial. However, denials can happen again if steps aren’t taken to prevent them, including:
- Ensuring the policy is up-to-date and reflects the business’s current operational needs
- Conducting annual reviews of coverage limits and exclusions
- Keeping detailed records of losses and filing the correct documentation at the time of the incident
- Working with knowledgeable local insurance advisors to get through the coverage selection and claims processes with less risk
Insurance Brokers Offer Tips and Solutions to Denied Business Insurance Claims
Businesses in Hawai‘i rely on commercial insurance to protect their assets and reputations from the costs of damages. However, simply having a policy does not guarantee compensation; the claims process has many steps and failure points that business owners need to recognize to get through it successfully.
At Atlas Insurance, our knowledgeable insurance advisors can help guide you through the process of selecting and updating insurance coverage as well as making successful claims. If a claim is denied, we can help you figure out the problem and take the right steps to address it.
For over 95 years, we have helped local business owners in Hawai‘i get the compensation for covered incidents that have impacted their business. Contact our team today to learn more about claim denials and how customized insurance plans can prevent them by providing your business with the coverage you need.